Godrej Consumers Products Ltd is a safe investment

Godrej Consumers Products Ltd is a safe investment

By Rajiv Kapoor | 10 September, 2016

In the past few years, Godrej Consumers Products Ltd (GCPL) has been aggressively scaling up its international presence through acquisitions. The strategy of the company is to be present in emerging markets in Latin America, Asia and Africa and serve customers in all the three categories of home, hair and personal care. The management has been particularly excited about the African market as it has more than half of the world’s fastest growing economies, a fast growing middle class population and increasing urbanisation. GCPL is a market leader in hair colour, household insecticides and liquid detergents, plus one of the largest players in soaps in the country. Flagship brands such as Cinthol, Good Knight, Godrej Expert and Godrej No 1 are household names. The company clocked sales of over US $1.4 billion for 2016, with half of the revenue coming from international markets. The company has made a strong emphasis on inorganic growth through acquisitions as globally businesses are down and valuations are low. Hence, this is the right time to acquire companies mainly in the personal and household care segments. A couple of recent acquisitions have been buying complete stakes in the Kenya based Canon Chemicals and US based Strength of Nature (SNL). The former is a leading manufacturer of personal and homecare products, while SNL is a leading maker of hair care products for women of African descent. It has an impressive portfolio of hair care brands such as Just for Me, African Pride and Profectiv Mega Growth. The American company acquisition will help GCPL build a leadership position in dry hair care and hair colour in the region and catapult the company on the global hair care map. A major prestige for the company recently came by way of being nominated in the Forbes list of Change the World top 50 global companies that address global social problems as part of their core business strategy. Godrej has been working diligently for good and green eco friendly products with measurable social impact and simultaneously producing excellent business results. Next year, the business prospects for GCPL are extremely bright with growth rates looking up on the back of good monsoons in the country. Cost saving initiatives, tight control over fixed costs and smart acquisitions undertaken should drive profitable growth for the company. GCPL harbours the ambition of becoming a market leader in the FMCG category in the emerging markets of Africa, Latin America and parts of Asia. The Godrej group as promoters holds majority stake in GCPL to the tune of 63.3%, while FIIs hold another 28.8%. The balance 7.9% is held by domestic institutions and the Indian public. There is tremendous room for stock price appreciation in the years ahead for GCPL as it is targeting doubling its revenue in the next 3-4 years. The share currently trading at Rs 1,650 is a buy for a one-year investment horizon, with a 30% target appreciation price. The GCPL stock is a must have in any investors’ portfolio for long term with an impressive array of products, a healthy balance sheet and the trustworthy Godrej group as promoter.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.


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