09 Dec , 2024 By : Debdeep Gupta
Godrej Consumer Products (GCPL) shares plunged over 9 percent in opening trade on December 9, weighed down by the company's weak growth outlook for the October-December quarter. The company anticipates sales growth in the mid-single digits for Q3 while stating that demand conditions in the economy have been 'subdued' for the past few months.
The company also anticipates a 'temporary downward breach' in the margin this quarter, from the normative range.
Further adding to the pressure, the company said that it expects its standalone business to report around flattish UVG (Underlying Volume Growth) for the quarter under review. "The demand conditions in India have been subdued for the past few months which is evident in FMCG market growth," said GCPL. Despite this, the company has over the past six quarters 'consistently delivered an average organic UVG of ~7 percent,' it added.
The delayed onset of winter in the North and a cyclone in South India have impacted the Home Insecticides segment, which accounts for a third of the standalone business. Despite this, the rest of the portfolio is demonstrating strong performance and is on track to achieve double-digit UVG.
Meanwhile, a high base of the previous fiscal, when the company enjoyed the benefits of favourable commodity prices which lifted its margins, is also likely to affect its on-year growth numbers.
Despite the warnings, brokerages remain cautiously optimistic about the headwinds of slowdown subsiding soon. JPMorgan expressed optimism over the strong growth indicators for the rest of GCPL's portfolio while citing that these headwinds were not structural.
While Jefferies does believe that the earlier-than-usual quarterly sales updates may add to investor concerns of an industry slowdown, it still expressed confidence over the management's outlook of margin impact being a transitory issue.
UBS Securities also sided with GCPL, banking on the rest of the company's portfolio, which is expected to see double-digit volume growth.
Along those lines, JPMorgan retained its 'overweight' call on GCPL, while UBS Securities and Jefferies held on to their respective 'buy' ratings on the stock.
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