Analyst Corner: Godrej Consumers – Upgrade to ‘buy’ with revised TP of Rs 850

Worldwide enterprise gross sales grew 18% with 22% EBITDA development; EBITDA margin expanded 50bps YoY to 17.2%.

Consolidated income / EBITDA / PAT grew 27%/ 15% / 42%. India enterprise gross sales grew 35% (24% in Jan-Feb’21) with 29% home quantity development (2-year CAGR of 5%). Soaps grew 41% pushed by continued market share beneficial properties resulting from micro advertising initiatives and new launches. Family Pesticides grew simply 34% (28% globally) pushed by broad based mostly efficiency in burning in addition to premium codecs.

Worldwide enterprise gross sales grew 18% with 22% EBITDA development; EBITDA margin expanded 50bps YoY to 17.2%. Indonesia enterprise grew 4% in CC phrases impacted by opposed macroeconomic elements and better aggressive depth in moist wipes. Indonesia EBITDA margin expanded 230bps to 35.4% pushed by value saving initiatives. Then again, strong restoration continued in GAUM (Africa, USA, and Center East) with income development of 36% (CC phrases), EBITDA margin growth of 710bps YoY to 10.9% pushed by scale leverage and price saving initiatives.

Different highlights: 1) OCF / FCF grew by 23% / 40% YoY to Rs 25bn / Rs 23bn respectively, 2) Working capital days is flat at 11 days, 3) Internet Debt decreased by 73% to Rs 0.7bn with Internet Debt / Fairness ratio decreasing from 0.32 to 0.07 in FY21, 3) Administration said that they’re higher ready to deal with the second wave of Covid – has ramped up manufacturing and have optimum stage of stock throughout the provision chain, nonetheless, localised lockdowns may influence frontline servicing and replenishment of retailers, 4) second wave of covid is a probable tailwind for hygiene (together with soaps) class and headwind for discretionary classes, 5) innovation charge was in high-teens in FY21, and 6) E-commerce contributed ~4% of enterprise in FY21.

Valuation and dangers: We enhance our earnings estimates by ~2%; modelling income / EBITDA / PAT CAGR of 10% / 12% / 13% over FY21-23E. Improve to BUY (from ADD) with a SoTP-based revised goal value of Rs 850 (Rs 800 earlier). At our goal value, the inventory will commerce at 39x P/E a number of Mar-23E. Key draw back threat is structural deceleration in India family pesticides and steep enter value stress.