Godrej Consumer shares drop 3% after Q3 PAT drops 14%. What should investors do?

Godrej Consumer Products shares dropped by 3.3% in intraday trade to their low of Rs 1,096.30 after the company’s third-quarter FY25 results, which reported a 14.2% year-on-year (YoY) decline in consolidated net profit to Rs 498.31 crore.

Meanwhile, revenue from operations grew 3.5% YoY to Rs 3,749.11 crore, compared to Rs 3,622.80 crore in the year-ago period.

The company’s Q3 FY 2025 consolidated EBITDA margin stood at 20.2% and the Q3 FY 2025 EBITDA declined by 21%.


Region-wise, Indonesia volumes rose by 6%, with sales up 9% in INR terms. However, the Africa, USA, and Middle East (organic) sales fell 8% in INR terms, though they grew by 1% in constant currency terms. Sales in Latin America and other markets surged by 165% in INR terms and 28% in constant currency terms YoY.

“Demand conditions in India have witnessed temporary headwinds over the past few months, led by a slowdown in urban consumption. A surge in palm oil prices by more than 40% along with weak seasonality in household insecticides has led to a flat underlying volume growth and mid-single digit underlying sales growth for our Standalone business. The surge in palm oil costs is negatively impacting our EBITDA margin. Our reported Standalone EBITDA margin at 22.6% is lower than our normative margin,” said Sudhir Sitapati, Managing Director and CEO of Godrej Consumer while commenting on the company’s Q3 performance.

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Should you buy, sell, or hold Godrej Consumer Products' stock? Here's what analysts say:

Jefferies

Jefferies maintained a 'Buy' rating on Godrej Consumer, but the target price has been reduced to Rs 1,400 from Rs 1,425.

The company has highlighted continued pressure in urban areas, which is expected to impact the next quarter as well. While the worst seems to be over, the recovery is anticipated to be gradual. Jefferies has also cut the company's EPS estimates by 2% to 4%.

Macquarie

Macquarie maintained a 'Neutral' rating on Godrej Consumers, cutting the target price to Rs 1,125 from Rs 1,260 following a Q3 EBITDA miss.

While volumes are expected to recover, margins are likely to remain weak. Q4 EBITDA margins are anticipated to be flat quarter-on-quarter, as palm derivatives used in soap are not seeing a similar price decline as palm oil.

Macquarie has also reduced EPS estimates, citing headwinds such as near-term concerns on premium-end demand, particularly in insecticides, and the gradual recovery pace in urban areas. EPS estimates for FY25E, FY26E, and FY27E have been cut by 7%, 9%, and 9%, respectively, factoring in the Q3 miss, margin pressure, and slower recovery.

Morgan Stanley

Morgan Stanley maintained an 'Equalweight' rating on Godrej Consumer Products, with a target price of Rs 1,313.

The brokerage noted a slight beat in Q3 performance but highlighted a mixed outlook ahead. While rural growth outpaced urban areas, supported by the company's Van initiative, the urban slowdown weighed on growth in core premium categories.

Demand for household insecticides (HI) was impacted by relatively poor seasonal conditions, while the personal wash segment saw mid-to-high single-digit volume declines. However, similar pricing growth helped offset the volume drop.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)