Shares of Godrej Consumer Products (GCPL) fell by 8% on December 9 following the company’s announcement about its challenging outlook for Q3FY25, which highlighted pressures in key business segments.
Challenges Faced by GCPL The FMCG giant, which is a leader in the personal care and household products sector, reported that its soaps category, which contributes around one-third of its revenue, has been hit hard by a significant 20-30% year-on-year increase in palm oil and derivative prices. To mitigate the rising costs, Godrej Consumer has implemented price hikes and reduced the grammage of its soap bars. These measures, however, led to reduced inventories in wholesale and household channels, further contributing to the price decline.
Additionally, the company’s home insecticides segment also faced setbacks due to delayed winters in North India and a cyclone in the South, which adversely impacted quarterly growth.
Despite these setbacks, GCPL emphasized that the remainder of its portfolio is performing strongly, and it expects double-digit underlying volume growth (UVG) across other segments.
Despite the current challenges, analysts, including JPMorgan, have maintained an “Overweight” rating on GCPL, with a target price of ₹1,410, suggesting an upside potential of around 14.57%. The brokerage firm remains optimistic about the company’s long-term prospects, citing that its price hikes are expected to support revenue growth once the external pressures stabilize.
Looking Ahead GCPL projects a flattish volume growth in its standalone business for Q3FY25, with mid-single-digit sales growth. The company remains confident that volume growth will return to normal once palm oil prices stabilize in the coming months.
