Should investors eye Godrej Consumer or book profit as Q1 results miss estimates?

Analysts are mostly positive on the GCPL stock after the FMCG major's Q1FY24 print was healthier on quality overall. Foreign brokerage Morgan Stanley has an ‘overweight’ rating on the counter with a target price of Rs 1,072. MS said that Q1FY24 results missed estimates, however, results were way ahead of the company’s performance. “Improving trend in growth, margin and capacity investments are positives for the company," the brokerage noted.

Nomura has a 'Buy' rating on the stock, with a target of Rs 1,225 per share, while CLSA has an 'underperform' rating, with a target of Rs 1,040 per share.

Meanwhile, domestic brokerage house Nuvama maintains a 'Buy' with a target of Rs 1,315 on the GCPL stock, while Motilal Oswal has a 'Buy' rating and a target of Rs 1,200 on the counter.

Emkay too maintains a 'Buy' rating and a target of Rs 1,225 per share on the back of accelerated growth in the business and improved profitability, with strategic actions effected under the new leadership.

"Further to its thrust on relevance, access and simplicity in the business, the company is looking at capex spend of Rs 900 crore over the next 18-36 months; this will help drive cost efficiency in the business," Emkay said.

The company's consolidated revenue and operating profit came in line with analysts' expectations, but adjusted PAT (profit after tax) fell short by 14.7 percent due to currency depreciation in Nigeria.

Reported PAT declined 7.6 percent YoY due to a stamp duty related to the Raymond business acquisition. Notably, the gross profit margin grew by 710 basis point (bp) YoY/80 bp quarter-no-quarter (QoQ) to 53.7 percent, with EBITDA margin improving 280 bp YoY, despite a 59 percent rise in adspends.

Raymond Consumer Care Ltd (RCCL) business incurred operating loss due to inventory reduction, yet management aims for equivalent profitability, said Motilal in a note.

"The Raymond’s business put up a lackluster show, with topline at Rs 48 crore (after destocking and sales return of slow-moving SKUs) and EBITDA loss of Rs 44 crore (mainly due to returns and accelerated media spends)," according to Emkay.

Further, analysts noted that GCPL's profitability outlook is also gradually improving in the overseas business, evident in Q1 through double-digit growth in key geographies. "Working capital enhancement, particularly in the international segment, is also progressing as planned."