Godrej Consumer Shares Surge 6% Despite Profit Decline as Goldman Sachs Raises Target Price

Godrej Consumer Products Ltd (GCPL) saw its shares jump 6% to Rs 1,185.95 following the release of its quarterly results and an upward revision in target price by Goldman Sachs. The global investment bank raised its target price for GCPL to Rs 1,425, signaling confidence in the company's future performance despite mixed quarterly results.

Financial Performance

GCPL reported a mixed bag of financial results for the quarter:

Metric	Value	YoY Change
Consolidated Net Profit	Rs 459.3 crore	-6.5%
Revenue	Rs 3,825 crore	+4.3%
EBITDA	Rs 733.6 crore	-3.5%
Operating Margin	19.2%	-1.5 percentage points

Segment-wise Performance

India Operations

Sales growth: 4%
Volume growth: 3%
Notable: Strong double-digit expansion in non-soap categories

International Operations

Indonesia: Mid-single-digit volume growth, but 7% drop in constant-currency sales
Africa, US, and Middle East: 25% growth in rupee terms
Latin America: 9% decline in rupee revenue

Key Insights

CEO Sudhir Sitapati noted that GST rate cuts temporarily disrupted trade channels in soaps and hair colour segments, which may have contributed to the profit decline. However, the steady growth in India operations, particularly in non-soap categories, suggests resilience in the company's core market.

The mixed performance in international markets highlights both challenges and opportunities for GCPL's global expansion strategy. While some regions like Africa, US, and Middle East showed strong growth, others like Latin America faced headwinds.

Analyst Perspectives

Goldman Sachs maintained its Buy rating, citing expected reversal of GST transition headwinds
Citi also maintained a Buy rating with a target price of Rs 1,350
Elara Capital kept an Accumulate rating but reduced its target to Rs 1,240

Strategic Moves

GCPL's acquisition of men's face wash brand Muuchstac was highlighted by Goldman Sachs, indicating the company's efforts to expand its product portfolio and tap into growing market segments.

The market's positive reaction, reflected in the 6% share price jump, suggests that investors are focusing on the company's growth potential and strategic initiatives rather than the short-term profit decline. As GCPL navigates through temporary disruptions and continues to expand its product range, investors and analysts appear optimistic about its future prospects in the competitive consumer goods sector.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
+5.36%	+4.79%	+2.58%	-6.62%	-7.35%	+76.29%

Godrej Consumer Products Limited (GCPL) demonstrated resilience in its Q2 FY2026 performance, navigating through GST transition impacts in India and macroeconomic challenges in Indonesia. The company also announced a strategic acquisition to bolster its personal care portfolio.

Financial Highlights

GCPL reported consolidated sales growth of 4.00% year-on-year in both INR and constant currency terms for Q2 FY2026. This growth was underpinned by a 3.00% increase in underlying volume. Key financial metrics include:

Standalone business: 4.00% sales growth with 3.00% underlying volume growth
Indonesia: 7.00% sales decline in constant currency and INR terms, despite low mid-single-digit volume growth
Africa, USA, and Middle East: 25.00% sales growth in INR (15.00% in constant currency)
Consolidated EBITDA margin: 19.30%
Consolidated net profit: 2.00% year-on-year decline (excluding exceptional items and one-offs)

Segment Performance

India Business

The India business grew by 4.00% in sales and 3.00% in volume, despite short-term disruptions from GST rate reductions. Notable segment performances include:

Home Care: 6.00% growth, driven by strong performance in Air Fresheners and Fabric Care
Personal Care: 2.00% decline, primarily due to GST-related impact on soaps

International Business

Indonesia: Faced ongoing macro and pricing pressures, with a 7.00% revenue decline
Africa, USA, and Middle East (GAUM): Delivered robust 25.00% sales growth in INR terms (15.00% in constant currency) and 20.00% EBITDA growth

Strategic Acquisition: Muuchstac Brand

GCPL announced the acquisition of the Muuchstac brand from Trilogy Solutions Private Limited. Key details of the acquisition include:

Muuchstac is a fast-growing men's grooming brand with a strong position in the men's facewash segment
The brand recorded revenues of approximately ₹80 crore and adjusted EBITDA of around ₹30 crore over the twelve months ending September 2025
The acquisition is structured as a slump sale, with a gross business valuation of ₹380 crore for the first tranche (76% payment)
The deal includes a performance-based second tranche payment after 12 months, with the total gross payment expected to be between ₹400-500 crore

Management Commentary

Sudhir Sitapati, Managing Director and CEO of GCPL, commented on the results: "Q2 FY26 has been a resilient quarter for GCPL, especially given the backdrop of the GST transition in India and continued macroeconomic challenges in Indonesia. Despite these headwinds, our India business, excluding soaps, has delivered double-digit underlying volume growth, reflecting the strength of our core portfolio and execution."

Regarding the Muuchstac acquisition, Sitapati added: "We are delighted to welcome Muuchstac brand to Godrej Consumer Products. The brand's strong resonance among younger consumers, high profitability, and proven digital execution model make it a powerful addition to our Personal Care portfolio."

Outlook

GCPL expects performance to strengthen sequentially through FY26, with the second half anticipated to deliver a stronger trajectory. The company remains confident in achieving high single-digit underlying volume growth in its Standalone business and high single-digit revenue growth at a consolidated level.

This article is for informational purposes only and should not be considered as financial advice. Always consult with a qualified financial advisor before making investment decisions.