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Godrej Consumer Products: A company with healthy financials and diversified revenue streams
During present times, Godrej Consumer Products Limited should benefit as it is FMCG company, with strong portfolio to deliver in COVID-19 world. Roughly 80% of its product portfolio includes health (household insecticides), hygiene, and value for money products. Godrej Consumer Products Limited launched sanitiser products across India and SAARC, Indonesia, Africa, Latin America, and USA businesses. Plans are there to scale these up into full portfolios. Diversified revenue profile and strong brands should help Godrej Consumer Products Limited perform in challenging times.
Overview of Godrej Consumer Products
Godrej Consumer Products is a part of over 123-year-young Godrej Group. As an emerging market company, it has seen rapid growth and is pursuing exciting and innovative aspirations. Group has patronage of 1.15 billion consumers globally, across varied businesses. In line with 3 by 3 approach to international expansion, it is building presence in 3 emerging markets, which are Asia, Africa, and Latin America, across 3 categories like home care, personal care, and hair care. In emerging markets, it ranks among largest household insecticide and hair care players. In household insecticides, it is categorised as a market leader in India and Indonesia and it is expanding its footprint in Africa.
Growth Enablers of Godrej Consumer Products
Strong Returns in a Decade
We have just finished a decade and it is worthy to spend some time and analyze how stock of Godrej Consumer Products Limited has performed over this recent decade. We will also see what factors have actually contributed to this increase and whether this performance is likely to sustain or not. The company has moved from over 50% soaps portfolio in 2010 to a more balanced and strategic category portfolio. Now, it has three core categories, namely household insecticides, personal wash, and hair care. Entrance into new category to serve hair care needs of African women exhibits that the company capitalizes on market opportunity. In FY10, 23% of its overall revenues were from international businesses. This has increased to 46% in FY20, with Indonesia and Africa making up 41%. Continued support from government and growth in demand have principally supported the company in past decade and these growth enablers are likely to support in years to come.
Internet has also contributed in a big way as it has facilitated cheaper and more convenient mode and increased the company’s reach. All these factors have contributed to make this stock a multi-bagger one in past decade. Shares of Godrej Consumer Products Limited delivered a strong return of ~932.5% over FY10-FY20. Do you know what that means? This means that if you would have invested a sum of INR1,00,000 on 4th January 2010, it would have grown to INR10,32,526.54 on 30th December 2020.
Promising Future
Godrej Consumer Products Limited has a total market cap of ~INR80,98,842.15 lakhs and free float market cap of ~INR30,06,219.65 lakhs. The company saw impact of lockdown but it displayed strong agility and ramped up production and resolved logistics challenges. Recovery has been seen across most markets of operations and it leveraged technology and strong relationships with channel partners. India business saw an improvement in operating performance, with growth seen in soaps and recovery seen in hair colour. Business saw hygiene portfolio getting scaled up and ramping up of rural distribution.
Performance in household insecticides saw some disruption due to supply issues as there were regional lockdowns but its impact was somewhat mitigated by strong underlying consumer demand. Demand is likely to be strong now given a change in consumers’ behaviour.
Growth strategy is focused on emerging markets and emergent consuming class in them. With rise in income, markets should mature and greater reach should be helped by new distribution systems and digital economy. Godrej Consumer Products Limited is ramping up go-to-market and digital strategies and reach so that it can go deeper and there can be improvement in penetration.
I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.
I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.
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