Godrej Consumer Products Ltd – Brighter Living

Date Published: February 15, 2021

Godrej Customer Image

Company Overview:

Godrej Consumer Products Limited is an India-based company, which is engaged in the manufacture of personal and household care products. Godrej Consumer Products Limited manufactures personal care, hair care, household care and fabric care products. The Company’s products include toilet soaps, cosmetics, shaving creams, talcum powder, household cleaners and fabric detergents.The Company’s geographic segments include Within India and Outside India. It offers hair care products. The Company’s Personal Care range of brands includes Cinthol, Grade 1 soap, protekt, Soft & Gentle, Cuticura, Mitu and Pamela Grant. Its home care range of brands includes Good knight, HIT, aer, Ezee and Stella. Its hair care range of brands includes Ilicit, Touch of Silver, Roby and Renew. The Company focuses on regions, including India, Asia, Africa and Latin America. The Company offers a range of products in India, which include household insecticides, such as aerosols, liquid vaporizers, coils and mats; hair colors; soaps and air fresheners. Its protectrange of products consist of approximately three hand washes, a hand sanitizer and a personal mosquito repellent spray, including instant foam hand wash and alcohol-free sanitizer.

Industry Overview:

Fast-moving consumer goods (FMCG) sector is India’s fourth largest sector with household and personal care accounting for 50% of FMCG sales in India. Growing awareness, easier access and changing lifestyles have been the key growth drivers for the sector. The urban segment (accounts for a revenue share of around 55%) is the largest contributor to the overall revenue generated by the FMCG sector in India. However, in the last few years, the FMCG market has grown at a faster pace in rural India compared to urban India. Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50% of the total rural spending.The retail market in India is estimated to reach US$ 1.1 trillion by 2020 and expected to grow at 20-25% per annum, which is likely to boost revenue of FMCG companies. Rise in rural consumption will drive the FMCG market. It contributes around 36% to the overall FMCG spending.

Company Operations:

Godrej Consumer Products Ltd (GCPL) is one of the leading Fast Moving Consumer Goods (FMCG) companies in India. The company has five product segments namely Household Insecticides Soaps Hair Colors Liquid Detergents and Air Fresheners. The company has manufacturing facilities at Malanpur in Madhya Pradesh Baddi in Himachal Pradesh Guwahati in Assam and Namchi in Sikkim. The company has established a strong international presence through a slew of acquisitions over the years. GCPL is among the largest household insecticide and hair care players in emerging markets. In household insecticides it is the leader in India and the second largest player in Indonesia. GCPL is the leader in serving the hair care needs of women of African descent the number one player in hair color in India and Sub-Saharan Africa and among the leading players in Latin America. GCPL ranks number two in soaps in India. It is the number one player in air fresheners and wet tissues in Indonesia. The company is among the largest marketer of toilet soaps in the country with leading brands such as CintholFairglow and Godrej No 1. Fairglow India’s first fairness soap created marketing history as one of the most successful innovations. The company is also the leader in the hair color category in India. They are having a vast product range from Godrej Renew Colourssoft Liquid Hair Colors Godrej Liquid & Powder Hair Dyes to Godrej Kesh Kala Oil Nupur based Hair Dyes. Their Liquid Detergent brand EZEE is the market leader in that category. Godrej Consumer Products Ltd was incorporated on November 29 2000 as a public company and was promoted by Godrej & Boyce Manufacturing Company.GCPL’s R&D offices concentrate on growing new items, institutionalizing new diagnostic strategies and discovering less expensive and more plentiful options to key crude materials. Through this innovative work focus, GCPL constantly collaborates with customers to acquire feedback on its items and data obtained is utilized to for the betterment of their new product development strategies.

Trends that are shaping the Indian Personal Care Market:

  • Shift towards mental and physical well-being through use of natural, organic, anti-fatigue, antipollution, anti-ageing products.
  • Increased adoption of men’s grooming products.
  • Higher spending on holistic bridal solutions such as year-long skin care regimes.
  • Increasing use of beauty devices and technology infused products and services.
  • Consumers opting for at-home services, online buying.
  • Heightened sense of individualism in purchase and choice among Millennials.
  • Interest and willingness to trade-up, increased use, bigger repertoire of products.
  • Growing importance of peer feedback and product reviews in purchase decisions.
  • Government Initiatives

Some of the major initiatives taken by the Government to promote the FMCG sector in India are as follows:

The Government of India has approved 100% FDI in the cash and carry segment and in single-brand retail along with 51% FDI in multi-brand retail.The Government has drafted a new Consumer Protection Bill with special emphasis on setting up an extensive mechanism to ensure simple, speedy, accessible, affordable and timely delivery of justice to consumers.The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of the FMCG products such as soap, toothpaste and hair oil now come under the 18% tax bracket against the previous rate of 23–24%. Also, GST on food products and hygiene products have been reduced to 0–5% and 12–18% respectively.GST is expected to transform logistics in the FMCG sector into a modern and efficient model as all major corporations are remodeling their operations into larger logistics and warehousing.

Strengths of Godrej Consumer Products:

  • Leader among India’s FMCG companies
  • Some brands in 100 most trusted brands
  • Presence in more than 60 countries
  • Widespread distribution network across India
  • To support the sales team it has a large network

Recognized Godrej Research & Development Centre

Our View:

Godrej Consumer Products is a leading emerging markets company. As part of the 123-year young Godrej Group, are fortunate to have a proud legacy built on the strong values of trust, integrity and respect for others. At the same time, company is growing fast and has exciting, ambitious aspirations.The Group enjoys the patronage of 1.15 billion consumers globally, across different businesses. In line with our 3 by 3 approach to international expansion at Godrej Consumer Products,  are building a presence in 3 emerging markets (Asia, Africa, Latin America) across 3 categories (home care, personal wash, hair care). Company ranks among the largest household insecticide and hair care players in emerging markets. In household insecticides, are the leader in India, the second largest player in Indonesia and expanding footprint in Africa.Company is the leader in serving the hair care needs of women of African descent, the number one player in hair color in India and Sub-Saharan Africa, and among the leading players in Latin America. Company rank number two in soaps in India and the number one player in air fresheners and wet tissues in Indonesia. Growing awareness, easier access, and changing lifestyle are the key growth drivers for the consumer market. The focus on agriculture, MSMEs, education, healthcare, infrastructure and tax rebate under Union Budget 2019 20 was expected to directly impact the FMCG sector. Initiatives undertaken to increase the disposable income in the hands of common man, especially from rural areas, will be beneficial for the sector.With a clear focus on health in the years to come, the industry is expected to move towards hygiene and personal care items. Besides, health experts have repeatedly urged the populace to practice good hand hygiene since the coronavirus outbreak unleashed. The pandemic swelled the sales and prices of hand sanitizers across international markets with demand exceeding supply in the online as well as offline stores. The industry is now anticipated to grow at a compound annual growth rate of 22.6% from 2020 to 2027. Revenue is expected to show an annual growth rate (CAGR 2020-2025) of 12.1%, resulting in a projected market volume of US$7,493m by 2025.User penetration will be 11.1% in 2020 and is expected to hit 24.0% by 2025.The average revenue per user (ARPU) is expected to amount to US$27.75.

As per the mean estimates of earnings projections made by brokers at Bloomberg, the estimated EPS for FY2021 and FY2022 stands at Rs.16.76 and  Rs.18.68 respectively as compared to EPS of Rs.15.69 for FY 2020. The stock is trading at a PE of 51.17.Therefore, taking into consideration that this recommendation of Godrej Consumer Products Ltd is being given for 1- 2years’ time horizon.

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