Godrej Consumer’s Indonesia recovery and GAUM momentum underpin double-digit FY27 growth

Investment View and Valuation

Motilal Oswal Financial Services retained its Buy rating on Godrej Consumer Products Limited (GCPL) following the 1QFY27 results. The broker viewed the outcome as broadly in line overall, although India gross margin was below expectations.

The constructive view is supported by India’s volume-led growth, improving GAUM profitability and a broadening recovery in Indonesia. Motilal Oswal expects a 15% revenue CAGR and 15% EBITDA CAGR over FY26-FY28E. It values GCPL at 45 times March 2028E EPS and maintains a target price of Rs 1,300.

1QFY27 Consolidated Performance

India Business: Volume Growth Despite Margin Pressure

India revenue, including other operating income, grew 12% year on year to about Rs 2,530 crore, with underlying volume growth of 7%. Home Care and Personal Care grew 12% and 11%, respectively. Soaps returned to positive volume growth after several weak quarters.

Household Insecticides experienced a weather-led double-digit volume decline in June. However, GCPL gained overall HI market share for the first time in nearly a decade and retained a 16% share in incense sticks.

India gross margin contracted by 280 basis points to 47.8% amid commodity inflation, missing expectations. Lower advertising expenditure limited the India EBITDA margin contraction to 10 basis points, to 21.8%. India EBITDA rose 11% to about Rs 560 crore, in line with estimates.

International Business: GAUM and Indonesia Improve

International revenue grew 30%. GAUM revenue increased 47% in rupee terms and 25% in constant currency, supported by FMCG strength, Hair Fashion, air fresheners and increased media investment. GAUM EBITDA grew 42% as operating leverage improved despite continued brand investment.

Indonesia sales increased 15% following a weak base, with underlying volume growth of 10% led by Shampoo Hair Care and Household Insecticides. The Stella LV relaunch demonstrated encouraging consumer traction. Management indicated that approximately 75% of future GAUM growth should come from FMCG, compared with an approximately even FMCG and Dry Hair mix in FY26.

Management Outlook and Key Risks

Management raised average India prices by about 5% in 1QFY27 and expects a similar pricing carryover into 2QFY27. No further post-quarter hikes are planned while Brent crude remains volatile but manageable at USD80-USD85.

• India volume growth is expected to stabilise at around 8% for FY27.
• India EBITDA margin is expected to recover to its normative range of 22-26% by 2HFY27 if commodity costs stabilise.
• GCPL remains on track for FY27 guidance and expects revenue growth to exceed guidance.
• Management is guiding for double-digit consolidated revenue and EBITDA growth.

El Niño-driven weather volatility is a risk to agricultural output, rural demand and India Household Insecticides demand. A warmer winter could support Household Insecticides in 2HFY27, while El Niño has supported Indonesia Household Insecticides demand.

Growth Initiatives and Forecasts

GCPL is expanding into faster-growing categories such as men’s face wash, toilet cleaners and liquid dishwash through Godrej Rizz. Its speedboats—Godrej Fab, GK Incense Stick and Godrej Air globally—are targeted to increase their revenue contribution from 15% to 20% in FY27.

Motilal Oswal maintained its FY27E and FY28E EPS estimates. Its key forecasts are as follows: