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Godrej Consumer shares tank 3% post Q3 results: Should you buy, sell or hold?

Godrej Consumer shares tank 3% post Q3 results: Should you buy, sell or hold?

The FMCG major reported a 4.93 per cent increase in consolidated net profit at Rs 527.60 crore for the third quarter ended December 2021.

Godrej Consumer shares tank 3% post Q3 results: Should you buy, sell or hold? Godrej Consumer shares tank 3% post Q3 results: Should you buy, sell or hold?

Shares of Godrej Consumer Products Limited (GCPL) tanked 3 per cent to hit an intraday low of Rs 848.25 on BSE after the company reported its earnings for the quarter ended December 2021.
 
The FMCG major reported a 4.93 per cent increase in consolidated net profit at Rs 527.60 crore for the third quarter ended December 2021. The company had posted a net profit of Rs 502.80 crore for the quarter ended December 2020.
 
Revenue from operations was up 8.08 per cent at Rs 3,302.58 crore during the quarter, as against Rs 3,055.42 crore in the corresponding period last fiscal, GCPL said in a regulatory filing.
 
The stock opened a tad higher at Rs 892 but failed to hold the early gains. At 11:20 hours, it was trading 2.74 per cent lower at Rs 854.90 on BSE. Market cap of the firm fell to Rs 87,420.46 crore.
 
“We delivered a mixed performance in Q3FY2022. While overall sales grew by 8 per cent, and we remain on track to achieve double-digit sales growth for the full year, it was driven entirely by price-led growth,” said GCPL Managing Director and CEO Sudhir Sitapati.
 
Motilal Oswal noted that Godrej Consumer (GCPL)’s 3QFY22 results were in line with our estimates. Market share gains in every segment of the domestic business are heartening. FY22 appears to be the second successive year of double-digit sales growth after the struggles seen in the latter part of the previous decade. It noted that this performance comes even before the initiatives undertaken by the new CEO have started to bear fruit. The sequentially improving gross margin trend is also likely to continue.
 
"We believe the recent improvement in the topline trajectory, stability in international business operations, and continued better capital allocation decisions are initial steps towards what could be the potentially massive revitalisation of both earnings and RoCE over the next few years, leading to a sustained re-rating as well. Valuing GCPL at 45x FY24E EPS, we arrive at our target price of Rs 1,150," it added.
 
HDFC Securities said that India's volume growth challenges (industry-led, share gain continues) would persist in the near term, and price hikes will remain the key contributor to growth. Sequential margin is expected to improve; the quantum of expansion will depend on further RM trends.
 
"We, therefore, expect GCPL to deliver stable growth at 11 per cent CAGR over FY22-24. We cut our FY22/23/24 EPS by 4/2/2 per cent. We value the stock at 42x on Dec-23 EPS to derive at a target price of Rs 1,025," the brokerage house added.