Godrej Consumer Products Limited’s (GCPL’s) pre-quarter update provides a glimpse of the expected good show in Q4FY2024. It is likely to post high-single-digit volume growth which is better compared to some of its peers, who are expected to register low to mid-single-digit volume growth. The good performance will be driven by high-single-digit broad-based volume growth in the India business and double-digit growth in the Indonesia business.
Consolidated revenue growth of mid-single digits is on account of currency devaluation in Nigeria. Gross margins and EBITDA margins will remain high on the back of steady input prices. The newly launched Good Knight Agarbatti is well-received by consumers.
To deliver high single-digit volume growth in Q4FY2024.
GCPL’s India organic business is likely to deliver strong underlying volume growth of high single-digit with growth being broad-based across personal and home care categories. This was better than the organic volume growth of 4-5% achieved in the past two quarters. Acquired brands such as Park Avenue and Kamasutra's performance was in line with seasonality. Hence, the reported underlying volume growth would be in double digits. Good acceptance of new launches and improved penetration will help GCPL achieve high-single-digit volume growth in the quarters ahead
Simplification of the Africa business to improve margins.
GCPL has decided to divest its stake in its subsidiary, Godrej East Africa Holding Limited, Mauritius, along with step-down subsidiaries having operations in Kenya and Tanzania to HGK Africa Weave for a consideration of Rs. 30 crore. The transaction is almost complete, and it has an impact of Rs. 70 crore in Q4FY2024. The effect of restructuring is likely positive on cash flows. With this, the company will be restructuring Rs. 500 crore of the Africa business into a franchisee model, which will result in the addition of Rs. 50 crore at the PAT level. GCPL expects considerable improvement in profitability in the coming years.
Revenues to grow by 6%; OPM to improve in Q4.
We expect GCPL’s consolidated revenues to grow by ~6% y-o-y driven by double-digit revenue growth in the domestic business, while international business is likely to witness a decline in revenues due to currency devaluation in the Nigerian business. Gross margins to expand by 210 bps y-o-y to 55%, while OPM is expected to expand by 40 bps y-o-y to 21.2%. The operating profit will grow by 8% y-o-y.
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