GCPL shares drop 6% after Q3 results but analysts remain optimistic

Shares of Godrej Consumer Products Ltd. were trading nearly 6% lower on Tuesday, January 27, despite the company reporting a largely in-line December quarter performance.

Godrej Consumer posted a steady quarter, with margins coming in above expectations. However, profit after tax missed estimates due to an exceptional loss during the quarter.

Revenue stood at ₹4,099 crore versus the street estimate of ₹4,112 crore. EBITDA came in at ₹880.4 crore, higher than the poll estimate of ₹850 crore, while margins expanded to 21.5% against expectations of 20.1%.

PAT, however, declined to ₹498 crore compared with the poll estimate of ₹598 crore, weighed down by an exceptional loss of ₹91 crore.

Domestic underlying volume growth came in at 9%, broadly in line with estimates of 8-9%.

In India, home care revenue rose 12% YoY to ₹1,226 crore, while personal care revenue increased 7% to ₹1,115 crore. Fabric care continued to maintain strong growth momentum, and the personal wash segment gained further market share.

In Indonesia, management expects operating conditions to improve from FY27.

Speaking to CNBC-TV18, CFO Aasif Malbari said overall demand trends remain largely unchanged. He said that Q3 saw some disruption due to GST-related issues, particularly in the soap category.

Management expects a sequential improvement in soap demand in Q4, while the company continues to gain market share in household insecticides.

The management expressed satisfaction with India's growth trajectory and expects it to build sequentially.

Indonesia, meanwhile, continues to remain range-bound on both the topline and bottomline.

The company is stepping up cost-saving initiatives and believes the margin story is sustainable. It has maintained its margin guidance for the full year.

What brokerage are saying

Morgan Stanley has an 'Overweight' rating on GCPL with a price target of ₹1,291.

HSBC reiterated its 'Buy' rating and raised its price target to ₹1,470.

Jefferies maintained a 'Buy' rating with a price target of ₹1,500, citing that management commentary was fairly positive. The brokerage expects healthy HSD volume growth in India over the medium term, expansion in India margins, and a gradual recovery in Indonesia.