GODREJCP - Godrej Consumer Products Ltd. Share Price

Management outlined a challenging Q3 FY25, particularly in India, due to macroeconomic slowdown, high palm oil inflation, and a weak Household Insecticides season. India's organic revenue grew 4% (volume flat), with EBITDA down 21%. International markets compensated, with Indonesia (9% revenue, 12% EBITDA growth), Africa (9% EBITDA growth), and Latin America (>25% volume growth) performing well.

Outlook:

• Sequential recovery expected: Q4 FY25 should see improved volume/value growth, with margin normalization anticipated in H1 FY26 as palm oil prices stabilize.
• India focus: Maintained advertising spend (10% of sales) and rural expansion (vans). Green shoots in Laundry, Air Fresheners, Sexual Wellness, and Incense Sticks (high single-digit market share). Soaps aim for margin recovery (current ~20% EBITDA) via pricing actions.
• RNF (Household Insecticides): Rollout progressing (50% adoption in key products), expected to gain traction by Q1 FY26.
• International markets: Africa to return to organic revenue growth in Q4; Latam and Indonesia remain robust.
• Sustainability: Recognized in Dow Jones Sustainability Index (top global FMCG score).

Key Challenges:

• Urban slowdown impacting premium segments.
• Pricing pressures in Soaps (additional hikes likely).
• Distribution adjustments in Deodorants (separating GT/MT).

Management remains optimistic on rural demand and innovation-led growth, targeting long-term margin improvement (India: 24-26% EBITDA).

Question 1: What are the expectations for normalization in the Soaps business given destocking and price changes?
Answer: GCPL expects Soaps margins to normalize over 2-3 quarters as palm oil prices decline. Current EBITDA margins (~20%) remain healthy, with revenue growth near flat but market-beating. Sequential volume/value recovery is anticipated by Q4 FY25, with margin improvement to 24-26% targeted in H1 FY26.

Question 2: Why is Liquid Detergent growth outpacing Body Wash in India?
Answer: Liquid Detergents benefit from washing machine adoption and competitive pricing, making them a larger market share. Body Wash remains nascent but growing. GCPL aims to leverage future category expansion through strategic investments.

Question 3: How is rural growth performing compared to urban, and what is the impact of van operations?
Answer: Rural growth outpaces urban, driven by van distribution. Despite Q3's flat India volumes, rural contributions helped offset urban slowdowns. H1 FY25 saw ~7% volume growth, with vans critical to expanding rural reach.

Question 4: What is the consumer response to RNF in Household Insecticides?
Answer: RNF shows promise, with Incense Stick market share in high single-digits and ~50% handler share where distributed. Market share gains in Liquid Vaporizers and Coils are noted, though full impact will be clearer post-March 2025 season.

Question 5: How are urban consumption trends affecting premium segments?
Answer: Urban slowdowns, particularly in modern trade, are pressuring premium categories like Household Insecticides and Deodorants. Down-trading and weak discretionary spending are observed, but rural growth remains a buffer.

Question 6: What is the margin outlook for India and International businesses?
Answer: India margins (22.5% in Q3) aim for 24-26% post palm/PFAD normalization. Indonesia grew EBITDA 12%, Africa stabilized at ~15% margins, and Latin America saw >25% volume growth.

Question 7: Will pricing actions continue in Soaps?
Answer: Additional price hikes are likely to restore margins, as Q3's mid-single-digit pricing growth hasn't fully offset inflation. Q4 pricing growth is expected to exceed Q3.

Question 8: How is Fab performing amid competition?
Answer: Fab sustains strong growth and share gains in Laundry Liquids, supported by distribution expansion and innovation. Competition exists, but category growth and GCPL's strategy drive resilience.

Question 9: What is the status of Raymond Consumer Care's margins?
Answer: Post-acquisition EBITDA margins improved to mid-teens (from single digits), with further targets of ~20%. Deodorant GT challenges persist, but cost rationalization and ad spend are priorities.

Question 10: How is e-commerce affecting Nielsen data accuracy?
Answer: Urban slowdowns are partly attributed to quick commerce, which Nielsen under-reports. GCPL uses internal metrics but acknowledges urban GT/modern trade softness beyond e-commerce shifts.