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On Friday, HSBC analysts updated their outlook on Godrej Consumer Products (NSE:GOCP) Ltd. (GCPL:IN), increasing the price target to INR1,450 from INR1,360 while maintaining a Buy rating. The revision reflects a positive view of the company’s prospects in the fast-moving consumer goods (FMCG) sector.
The analysts highlighted the revival in the Household Insecticides (HI) segment, which accounts for approximately 33% of the company’s revenues in India. This optimism is partly due to the launch and scale-up of the RNF molecule. Additionally, the analysts noted the initiatives to simplify international operations, particularly in Africa, which is currently the company’s lowest return on capital employed (RoCE) and second-highest capital employed business, including goodwill.
The report also mentions the potential of Godrej Consumer Products’ recent entry into the pet care segment. This move is seen as an opportunity in a nascent yet promising FMCG category, adding option value to the company’s portfolio. According to HSBC, the company is poised for a strong earnings trajectory, with a projected double-digit profit after tax (PAT) growth opportunity, expecting a compound annual growth rate (CAGR) of 20% over the fiscal years 2025 to 2027.
The valuation of Godrej Consumer Products by HSBC is based on a price-to-earnings (PE) multiple of 50 times the fiscal year 2027 estimated earnings. This is an increase from the five-year average PE multiple of 44 times, justifying the raised target price of INR1,450. The analysts’ assessment underscores confidence in the company’s strategic moves and growth potential in the coming years.
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