While 65-70 per cent of domestic revenue contribution from these segments justifies the Street’s positive reaction, analysts at HDFC Securities believe GCPL’s business will continue showing volatility given the high dependence on seasonal and competitive categories in India, as well as a higher share of international business (45 per cent of consolidated revenue).
In fact, seasonality, competitive intensity, and international market dependence have been impacting GCPL over the last few years. In the last five years ending FY20, GCPL’s annual earnings growth almost halved to 10 per cent from 21.7 per cent, achieved during FY11-15, said Motilal Oswal Securities. This highlights the Street’s tendency to give it a discount, compared to peers.
Nonetheless, the firm’s sharp focus on volume growth and market share gains in previous quarters should help.
Even in Q4, the management highlighted market share gains in key segments. The success of the company’s focus on profitable growth in its Africa business, under the new leadership of Dharnesh Gordhon, remains to be seen.
Manoj Menon, head (research) at ICICI Securities, believes the firm is moving in the right direction and expects the soaps and HI segments to do well. However, he believes stocks will face pressure if the category growth trajectory underwhelms.
The growth metric for GCPL, over the next few quarters, will be a key monitorable.