Merrill Lynch's 'buy' for Godrej Consumer Products
Godrej Consumer Products’ (GCPL) margins are expected to be the best ever in FY10E, driven by a sharp fall in palm oil prices and product price increases effective September ’08.
RESEARCH: MERRILL LYNCH
RATING: BUY
CMP: Rs 128
Godrej Consumer Products��� (GCPL) margins are expected to be the best ever in FY10E, driven by a sharp fall in palm oil prices and product price increases effective September ���08.
Recent excise duty cuts should further reduce input costs. The management���s focus is on driving category sales growth, rather than market share gains. The latter may not be easy to achieve, given that GCPL is the market leader. The share of international sales may go up from the current 25% in the long term.
No impact of the economic slowdown has been witnessed on the FMCG sector so far, and sales growth has picked up in the past two months. Merrill Lynch believes GCPL can benefit from a tightening consumer wallet as its product portfolio is skewed towards economy brands. At 13x FY10E P/E, GCPL is trading at a discount to its FMCG peer group and the historic average. Merrill Lynch expects the discount to narrow as earnings momentum picks up.
RATING: BUY
CMP: Rs 128
Godrej Consumer Products��� (GCPL) margins are expected to be the best ever in FY10E, driven by a sharp fall in palm oil prices and product price increases effective September ���08.
Recent excise duty cuts should further reduce input costs. The management���s focus is on driving category sales growth, rather than market share gains. The latter may not be easy to achieve, given that GCPL is the market leader. The share of international sales may go up from the current 25% in the long term.
No impact of the economic slowdown has been witnessed on the FMCG sector so far, and sales growth has picked up in the past two months. Merrill Lynch believes GCPL can benefit from a tightening consumer wallet as its product portfolio is skewed towards economy brands. At 13x FY10E P/E, GCPL is trading at a discount to its FMCG peer group and the historic average. Merrill Lynch expects the discount to narrow as earnings momentum picks up.
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