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Godrej Consumer Products Doubles its Profit, Merges Its Foreign Subisdiary: Result Analysis

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Godrej Consumer Products has doubled (109.24%) its profit from 116.72 Crs in Q1FY16 to Rs 244.27 Crs in Q1 FY17. The remarkable feat was achieved mainly because of its foreign subsidiary as the standalone revenue saw no growth YoY.
The foreign subsidiaries’ revenue increased by 55.20% YoY. The interesting thing to note here is the foreign subsidiaries are doing better than the Indian company. The operating profit of foreign subsidiaries increased by 30.23%. On stand alone basis the company increased its operating profit by only 6.31%.
Godrej Consumer Products has approved the amalgamation of its wholly owned subsidiaries Godrej Consumer Products Mauritius Limited (“GCPML“) and Godrej Consumer Products US Holdings Limited (“GCPUSHL“) with the parent company Godrej Consumer Products Limited (GCPL).
The board has also announced an interim dividend of Rs 1/share.
Godrej CP Q1FY17 Result

Other Major Analysis are:

  • Operating margin improved by 50 basis point YoY from 15.77% in Q1FY16 to 16.36% in Q1 FY17.
  • Exceptional item for Q1FY16 was Rs 99.83 Crs, associated with its foreign subsidiary and for current quarter it was Rs 9 Crs, relating to restructuring of its foreign subsidiary.
  • Tax expense accounted for 23% of PBT for current year, where as for the same quarter last year tax expense was 35% of PBT. Indicating higher tax provisions to be made in coming quarters.
  • Finance costs has come down on standalone basis, but has remained unchanged in consolidated statement, indicating higher borrowing for its foreign subsidiary.
  • The net profit growth on standalone basis YoY was 11.96%, but on consolidated basis has increased by whooping 109%. this was mainly due to turnaround of its foreign subsidiaries from loss making entities to profit making businesses.

Future OutLook:

  • The chairman has stated that due to stretched summer and late monsoons, the Indian segment showcased a weak growth.
  • They also stated that, consumer demand may pick up post good  monsoon, due to increase in rural demand.
  • They also said that seventh pay commission implementation and GST bill passage might boost the product sales.

Godrej Consumer Products closed 2.72% down.
Godrej CP Q1FY17 Share Price Movement

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Disclosure: The authors at CapitalMind do not have any position in this stock.