(Reuters) – India’s Godrej Consumer Products reported a smaller-than-expected increase in third-quarter profit on Friday, hurt by the prolonged slowdown in urban demand.
The company, which makes the Cinthol brand of soaps among other products, reported a 14.2% rise in consolidated net profit of 4.98 billion rupees ($57.76 million) for the quarter ended Dec. 31.
Analysts, on average, expected a profit of 5.39 billion rupees, as per data compiled by LSEG.
Revenue from the sale of products rose 3% to 37.49 billion rupees, while raw material costs rose 2.3% due to a spike in key commodity prices such as palm oil.
KEY CONTEXT
The company had said in December that about two-thirds of its India business was under demand and margin stress due to a slowdown in urban consumption and higher costs of palm oil, a key raw material.
While rural demand has picked up in the last four quarters, it has been offset by a slowdown in urban consumption due to a delayed winter, sticky inflation, slow wage growth and not enough job opportunities, analysts have said.
Godrej has hiked prices moderately to offset higher commodity prices but that hurt sales volumes, which were flat compared to last year. The company had warned that price hikes could affect its consumer and wholesale businesses.
Larger peer Hindustan Unilever reported a marginal gain in quarterly revenue and profit on Wednesday, although it cautioned of near-term margin stress due to slow urban demand.
PEER COMPARISON
Valuation (next 12 Estimates (next 12 Analysts’ sentiment
months) months)
RIC PE EV/EBIT Price/S Revenue Profit Mean # of Stock to price Div yield
DA ales growth (%) growth rating* analysts target** (%)
(%)
Godrej Consumer 45.96 32.82 7.59 8.86 20.76 Buy 33 0.81 1.75
Products Ltd
Marico Ltd 48.17 35.12 7.19 10.38 11.19 Buy 37 0.94 1.42
Hindustan Unilever 49.03 34.09 8.42 6.63 8.25 Buy 19 0.91 1.85
Ltd
Britannia Industries 49.48 34.49 6.11 9.31 11.81 Buy 34 0.93 1.47
Ltd
* Mean of analysts’ ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
** Ratio of the stock’s last close to analysts’ mean price target; a ratio above 1 means the stock is trading above the PT
OCTOBER TO DECEMBER STOCK PERFORMANCE
— All data from LSEG
— $1 = 86.2210 rupees
(Reporting by Ananta Agarwal in Bengaluru; Editing by Savio D’Souza)
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