In its Q3 business update, shared with investors well before the end of the December quarter, Godrej Consumer said a 20-30% year-on-year surge in palm oil and derivatives prices has impacted the soaps category, which represents one-third of the standalone business revenue.
“To partly offset the cost increases we have taken price increases, reduced grammage of key packs and reduced various trade schemes. Such pricing actions typically have minimal impact on category consumption but do result in reduced inventory across wholesale and household pantry. Historical patterns indicate a normalization in volume growth following price stabilization, which we anticipate occurring in the next few months,” the company said.
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It also warned that weather conditions have impacted its home insecticides segment which contributes about one-third of the standalone business.“These are exceptional situations in Standalone business that the management believes are transitionary and not structural. Hence the management remains focused on navigating these near-term challenges while maintaining strategic investments for long-term growth as these negative trends are likely to persist for a few months,” Godrej said.
Domestic brokerage firm Emkay Global downgraded Godrej Consumer to reduce from add rating with a target price of Rs 1,225.
“We cut earnings by 4-7% to factor in demand as well as inflationary stress ahead. In a mid-quarter update (Q3FY25), GCPL noted demand stress, wherein 2/3rd of the India business is impacted: Soaps portfolio affected by sharp inflation in palm oil (leading to price hikes and reduced trade promotion), and stress in Household Insecticides, given delayed winter in the North and floods in the South. Overall India revenue should see mid-single digit value growth with flat volume,” Emkay said.
The brokerage said India EBITDA should decline by high teens in Q3 on a high base and raw material pressures. It sees low-single-digit consolidated revenue growth and low-double-digit decline in EBITDA.
Macquarie, which has a neutral call on GCPL, has reduced target price from Rs 1,300 to Rs 1,260 while CLSA has cut target to as low as Rs 1,000.
Shares of the company ended at Rs 1127.90 at close of trade, down 8.72%.
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