GCPL shares tank 10% after CEO’s exit; how stock fared under Sudhir Sitapati, target prices

Godrej Consumer Products Ltd (GCPL) tumbled 10 per cent in Wednesday's trade after the company's MD & CEO Sudhir Sitapati resigned, surprising many. Analysts noted that Sudhir’s tenure saw success in product innovation and expanding TAM for the India business, alongside an improvement in operating performance across GAUM (Godrej Africa, USA, and Middle East).

However, the performance was impacted by the high palm oil inflation cycle, muted growth in Indonesia, and limited success on inorganic initiatives, MOFSL said.

It noted that weak operating performance over the past two years, marked by flat consolidated Ebitda over FY24-FY26, along with tepid earnings expectations, had triggered a valuation correction. It felt this correction had largely played out in the GCPL stock, which had declined 15 per cent and 30 per cent over the past one and two years, respectively.

"GCPL has been focused on strengthening its core categories while continuing to invest in speedboats and new businesses, with faster execution now being the key focus," MOFSL said.

Aasif Malbari, currently Global Chief Financial Officer and President Godrej Africa, has been made MD & CEO of GCPL, effective immediately.

On Wednesday, the stock fell 10 per cent to hit a low of Rs 916.20. The 12-month Bloomberg consensus target on the stock at Rs 1,254 implied 34 per cent upside over the prevailing levels.

GCPL target prices

Among brokerages, Investec suggested a 'Hold' on the stock with a target of Rs 992. Goldman Sachs suggested 'Buy with a target of Rs 1,175. Nomura retained 'Buy' and gave a target of Rs 1,300. CLSA has 'Redeuce' call on the stock with a target of Rs 772.

Among others, Morgan Stanley is 'Equalweight' with a target of Rs 1,204. UBS target on GPCL stands at Rs 1,350, JPMorgan's Rs 1,175, Jefferies' Rs 1,400, Citi at Rs 1,350, HSBC's Rs 1,120 and Macquarie's at Rs 1,200.

Sudhir Sitapati & GCPL stock | Historical returns  
Sitapati was appointed MD & CEO in May 2021, bringing strong FMCG experience from Hindustan Unilever. The GCPL stock rallied 40 per cent from the announcement in May 2021 to his joining in October 2021, but has delivered nil returns since Oct 2021, despite the company’s continued focus on improving underlying business performance.

GCPL delivered a mere 5 per cent growth in sales, 6 per cent growth in Ebitda and 3 per cent growth in adjusted profit, annually, over FY22–26 during Sudhir’s tenure.

"The limited stock performance since Oct’21 also reflects the lack of sustained earnings acceleration. The sudden resignation and leadership transition could weigh on investor sentiment in the near term. However, GCPL has indicated that there is no need for a strategic reset, with the focus shifting toward faster execution rather than any major change in strategy," MOFSL said as it suggested 'Buy' and a target of Rs 1,300 on the stock.