Godrej Consumers Products Limited -Stock Analysis

Godrej Consumer Products Limited was founded in 2001 and is headquartered in Mumbai, India and is a part of 122yrs Godrej Industries and is one of the leading manufacturing companies in India in FMCG segment. Company manufactures products in 3 categories, Home Care, Personal care, and Hair Care which includes

Personal Care

Hair Care

Home Care

Cinthol

Godrej Expert (Hair color),

HIT (insect and mosquito repellent),

Godrej No.1

Godrej Renew (premium hair color),

Good Knight (Multi product mosquito and insect repellent brand)

Protekt (hand wash)

Bblunt (professional hair care products)

Godrejaer (room, bathroom fresheners),

 

Godrej Nupur (Herbal hair mehndi)

Godrej Ezee (special detergent for woolen and delicate clothes)

 

GCPL operates several manufacturing facilities in India spread over seven locations and grouped into four operating clusters at Malanpur (Madhya Pradesh), Guwahati (Assam), Baddi- Thana (Himachal Pradesh), Baddi- Katha (Himachal Pradesh), Pondicherry, Chennai and Sikkim. The company has its reach in India, Indonesia, South Africa, Latin America.

 What is Good?

The company is backed by the name Godrej which gives the company huge brand name and customer loyalty. The company has a strong distribution chain and manufactures different products with great utility at low cost which helped the company to acquire huge market share in recent years. 

Management Analysis-

  • The company has been managed by the reputed Godrej Group. 
  • Over the years, the management has successfully scaled up the business with their vast experience and expertise. 
  • Management is properly using its Free Cash Flows in expanding its business.
  • Management has provided significant growth in Sales and Net Profit in last 10years.

Management Score 8/10

Industry Analysis-

Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy with Household and Personal Care accounting for 50 per cent of FMCG sales in India. Revenues of FMCG sector reached US$ 52.75 billion in FY18 and are estimated to reach US$ 103.7 billion in 2020. The urban segment accounts for a revenue share of around 55 per cent and is the largest contributor to the overall revenue generated by the FMCG sector in India but in last few years FMCG market has grown at a faster pace in rural India compared with urban India. Also India’s contribution to global consumption is expected to get double to 5.8 percent by 2020.

Industry Score 9/10

Business Analysis-

The company operates in consumer categories such as Home Care, Personal care, and Hair Care products; the need of these products is constant and is not affected by any of the market events so it is least cyclical in nature. As a result of which it is known for its stability in earnings of the company as well as of shareholders.The company operates in FMCG Sector, which does not require frequent changes in the product as it is not a fast moving industry. Soaps, Mosquito repellents are products which will be continued to be used in the foreseeable future. The company was able to sustain its market share through continuous innovation which made them the pioneers in the market.

Business Score 8/10

Valuation Analysis-

Company’s EPS has grown by 15% in last 5years. Assuming that the EPS will grow at 21%   CAGR in EPS over next 10 years and PE will be 25, which is the average of last 10years. The estimated price of share would be 651.48 and keeping a safety margin as 10% the estimated price of shares would be 586. By this I value the company to be slightly overvalued.

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Valuation Score 8/10

 Total Score - 33/40 

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Disclaimer- The article is for educational purpose only. Nothing in this article should be interpreted as investing advice.
Disclosure- We might have recommended this stock to our advisory clients.
 

 

 

 

Posted On: 18 May 2019 Home / Investing / Godrej Consumers Products Limited -Stock Analysis