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Company Report

Godrej

Godrej consumer Products Limited, carved out of the consumer products division of the erstwhile Godrej Soaps Limited with an intention to create better shareholder value was more than successful in its objective with the stock price having doubled over the period of its existence. Its September quarter performance has been quite decent compared with companies like Hindustan Lever and P&G, though GCPL seems to have lost its growth traction.

Net sales at Rs 120.91 crore (Rs 105.42 crore) were up 15 per cent over the previous corresponding quarter after having gone down 5 per cent on a year-on-year basis during the preceding quarter, while sequentially it has followed a very erratic pattern and were up by 3 per cent over the June quarter sales of Rs 117.93 crore. The average sequential growth rate is just 1 per cent over the past six quarters of its existence.

This quarter the sale of Godrej brands was up 15 per cent over the previous corresponding period, while by-products registered a 94 per cent growth over the same period last year.

Sequentially, except for the liquid detergents segment there has been no significant growth, with hair colour and toiletries actually declining 4 per cent and 18 per cent respectively over the June quarter, while soaps has managed a negligible 0.06 per cent growth.

Raw material consumption was up a huge 37 per cent over the previous corresponding quarter to Rs 69.12 crore (Rs 50.52 crore), while sequentially the same went up by 31 per cent. The staff costs, which went up by 31 per cent over the year ago period to Rs 6.32 crore (Rs 4.82 crore) were up by only 4 per cent over the June quarter costs of Rs 6.10 crore.

Operating profits rose 16 per cent but sequentially it was up by just about 3 per cent over the June quarter profit of Rs 21 crore. OPM has stagnated at 18 per cent over the past two quarters and is the same it earned the corresponding quarter last year. Other income is insignificant.

The company has been bringing down its interest cost and at Rs 0.75 crore (Rs 1.06 crore) the same was 29 per cent below the year-ago period but 9 per cent over the June quarter.

The stock has been gaining value and currently trading at Rs 106 discounting its September quarter annualised EPS of Rs 9.66 by 11 times. With stagnant sales and operating profit, the stock is no longer cheap.

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