New product launches, margins to drive gains for Godrej Consumer Products

Godrej Consumer Products (GCPL) reported 6 per cent year-on-year (Y-o-Y) consolidated net revenue growth in Q4FY24 to Rs 3,385 crore and this was impacted adversely by currency movement.

The constant currency (CC) growth would have been 30 per cent Y-o-Y in Q4FY24.

India business clocked 12 per cent Y-o-Y revenue growth (5 per cent of it organic) with volume growth of 15 per cent Y-o-Y (7 per cent organic).

In the domestic business, home care and personal care segments registered 6 per cent and 4 per cent Y-o-Y growth, respectively.

The household insecticides or HI (Hit, Good Knight) category was subdued. Personal wash clocked high single-digit volume growth, sustaining market share gains.

GCPL gained market share across soaps, hair colour, air fresheners and HI in Indonesia.

Hair colour volume growth was in double digits. RCCL (Erstwhile Raymonds Consumer Care which GCPL acquired for Rs 2,825 crore in April  23) clocked 22 per cent Y-o-Y growth.

The international business was hit by adverse forex swings. Indonesia s revenue was up 15 per cent Y-o-Y (17 per cent in constant currency).

The GUAM (Godrej Africa, US and Middle East) revenue performance was hit by devaluation of the Nigerian naira with 16 per cent Y-o-Y growth in CC terms and down 23 per cent in rupee terms.

The Latin America & SAARC business grew 262 per cent in constant currency and 42.5 per cent in rupee terms.

It was hit by hyperinflation in the Latin American market.

GCPL targets high single-digit volume growth in FY25.

It is looking to gain rural market share under  Project Vistaara 2.0 , which plans to double outlets and triple village coverage.

Margins could improve in RCCL, in Indonesia and the rest of the world market.

Standalone gross margin rose 80 basis points (bps) Y-o-Y to 57.8 per cent due to favourable raw material movements.

Standalone operating profit margin expanded 20 bps Y-o-Y to 26.6 per cent, despite 175 basis points Y-o-Y increase in advertising and promotions or A&P spending to 11.4 per cent of sales.

Consolidated operating profit margin was up 230 basis points Y-o-Y to 22.3 per cent despite 205 basis points Y-o-Y increase in A&P.

GCPL posted a consolidated net loss of Rs 1,893 crore for Q4FY24 due to an exceptional item of Rs 2,376 crore, against a consolidated net profit of Rs 452.1 crore Y-o-Y.

The exceptional items included Rs 1,390 crore towards brand and goodwill impairment in Africa, Rs 930 crore due to a loss on sale of subsidiaries in East Africa and Rs 70 crore for other restructuring costs.

GCPL completed the re-organisation of its business in East Africa, which will have a positive impact of Rs 50 crore per annum on net profit but a negative impact of Rs 470 crore on revenues.

For FY24, consolidated revenue grew 6 per cent while operating profit grew 21 per cent and recurring net profit grew 9 per cent.

Consolidated A&P spends rose by 35.6 per cent Y-o-Y to Rs 1,340 crore, which is 9.5 per cent of sales (up 205 basis points Y-o-Y).

Absolute employee cost grew 12.4 per cent Y-o-Y (up 50 basis points as a percentage of sales) while other expenses were up 7.7 per cent Y-o-Y.

Operating cash flow was at Rs 2,070 crore, about 70 per cent of operating profit while capex was Rs 310 crore (versus Rs 230 crore in FY23).

The management is hoping to drive sales of Renofluthrin (RNF) mosquito repellent and is confident of sustained growth in Indonesia.

It sees improvement in rupee cash flow in Africa as currency volatility settles.

Innovations like liquid detergent and body wash could scale if successful.

The guidance of mid-teen operating profit growth in FY25 is conservative.

There could be an upside if RNF products and liquid detergents among others take off.

The stock is up almost 10 per cent since the results.

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