Godrej Consumer Products Limited (CGPL) Q1 results ending June 30, 2020 are not so impressive to start with the Financial year. The Q1 Results fell slightly short of the expectations. The estimate of the company’s consolidated profit was ₹315 crores, but the profits for Q1 ended up to ₹300 crore. The Gross Margins of the manufacturer of Household Insecticides, Hair colors, and Soaps contracted by 285 basis points(bps) year-on-year and one basis point is 0.01%. Noticing the Trend seen in the Q1 results of several Consumer Firms, Godrej consumer products Limited (CGPL) has also comparatively reduced its Advertising Expenses.
The Advertising and the Publicity expenses of the company declined 46% year-on-year which helped the company to expand its earnings before interest, taxes, depreciation, and amortization by 91 bps to 20.3%. The Company’s Africa Enterprise reported a small earnings loss in this Quarter. Analysts from Kotak Institutional Services note that the African Enterprise needs a fix and the Company also acknowledges the same. According to JM Institutional Securities Limited” There is a sequential improvement in the revenue of the company between the months of April to June, but the management alluded to severe drag from execution Challenges- these challenges must be addressed now that the new CEO has taken charge of the African Business.”
Coming to the Stock Market, CGPL (Godrej Consumer Products Limited) has lost about 3% on the NSE since the results of Q1 were Declared. But the shares are just 11% lower than their pre-covid highs in January. The stock trades at a valuation multiple of nearly 47 times trailing 12-month earnings.
Some parts of Godrej Company performed well during the First Quarter. Indonesia did well, clocking a 9 % revenue growth with a constant currency growth at 5%. The revenue growth of its Indian business stood at 5% and an underlying volume growth of 3%. The Household Insecticides posted a robust 27% growth, whereas soaps and hair colours were muted reporting a 2% and 18% decline in its Sales.
Kotak’s Analysts say that, “The Company is no longer in denial about its Growth struggles, and we believe course correction efforts will bear results.” The company’s performance will determine the stock’s trajectory. The domestic business has shown some encouraging signs in Q1FY21 and the performance of soaps and hair colours are the Key Monitorables and it would be the turnaround in the African Business.
