GCPL an 'undervalued' stock; outlook positive: Prakash Diwan

In a chat with ET Now, Prakash Diwan, Director, Altamount Capital Management, shares his view on Godrej Consumer Products Ltd (GCPL) following less-than-expected fourth quarter numbers by the FMCG player that dragged the stock lower.

ET Now: The management of GCPL has just talked about a further improvement in the domestic market share. Is that the only trick available now?

Prakash Diwan: GCPL is not focused entirely on the domestic market.

The FMCG company is insulated from the volume de-growth concerns that we have with other top FMCG companies.

The company has taken a considerable time to establish itself in new geographies — the African and the South East Asian markets.

It is placed second or at top slot in most of the segments that it is into. That is where you get pricing power. In such a scenario, a company like GCPL does not have to promote itself.

Hence, the advertising and promotions (A&P) expenses come down significantly. In other words, selling, general & administrative expense (SG&A) for the company is quite low.

That is exactly what a higher market share helps you with. The cost of retaining market share should be too primitively high, which some of the domestic companies are dealing with. GCPL is surely one of the relatively undervalued stocks.

You can anytime compare it with stocks such as Hindustan Unilever, Marico and Britannia. That is why this stock attracts a lot of interest.