Brokers' Call: Godrej Consumer Products

HSBC Overweight on GCPL

HSBC has retained its ‘Overweight’ rating on Godrej Consumer Products (GCPL) and raised the target price to Rs 665 from Rs 510. GCPL has performed exceptionally well this year against the FMCG sector.

This rerating has been driven by sustained operational performance and infusion of equity by Temasek, which helped deleveraged the balance sheet and allowed financial flexibility to execute the growth strategy, broader acceptance of GCPL’s 3x3 strategy that also feeds into the GCPL’s target of 10 times revenue in 10 years.

GCPL aims to achieve organic growth of 15-20%, while balanced through an inorganic route. “We are 5% above consensus on FY14e operating profits, as we believe that ongoing growth momentum will continue and GCPL’s superior execution of strategy will lead to better-than-expected operating performance,” said the HSBC note.