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Sales growth, lower raw material costs to help Godrej Consumer stock

The stock of consumer major Godrej Consumer Products (GCPL) rose by over 6 per cent and was the highest gainer in both the Nifty FMCG and BSE100 indices. This surge in stock prices is in response to the strong June quarter (Q1FY26) performance of the company. The company posted double-digit consolidated revenue growth, which comfortably beat the Street's estimates of mid-single-digit growth. The stock has gained about 26 per cent since the start of March, outperforming the Nifty FMCG return, which has been in the single digits during the same period. Aided by high single-digit volume growth, GCPL is expected to post double-digit growth on a consolidated basis. This overall growth is expected to be driven by a robust performance in the India home care business, especially the household insecticides (HI) segment and the Africa geography. In addition to HI, home care includes air care and detergents, accounting for 45 per cent of India's sales and 27 per cent of the consolidated business. Commenting on the performance of GCPL and other FMCG majors, analysts led by Abneesh Roy of Nuvama Research pointed out that companie.s, except those with large summer categories, are surprising positively, indicating that the worst of the slowdown is behind and a gradual recovery is ahead. For GCPL, the HI segment in India exceeded expectations, with mid-to-high single-digit growth, driven by incense sticks, new electrical formulations, a strong June recovery from new ad campaigns, and favourable weather. Household insecticides had delivered strong double-digit volume growth in Q4FY25, boosted by a favourable season and effective premiumisation. Goodknight Agarbatti emerged as the market leader, while premium formats, like liquid vapourisers with the new molecule RNF, continued to capture market share, reflecting consumer acceptance and the success of premiumisation efforts. While home care performed well, personal care (51 per cent of India sales) is expected to grow in the low-single digits during the quarter, affected by the soaps segment, which saw price-volume rebalancing due to commodity volatility. A steep rise in palm oil inflation and price adjustments led to volume decline in the March quarter and compressed margins. Standalone (India business) operating profit margins are likely to be below the normative range (24 per cent–26 per cent) due to higher input costs, advertising and promotional spend, and delayed pricing action in soaps. Given these pressures, analysts led by Mehul Desai of JM Financial Research expect margin compression of 270 basis points Y-o-Y. With palm oil prices moderating at the end of June, the company expects the gains to flow through to the operating level in the second half of FY26. In the international business, Indonesia, which accounts for 14 per cent of consolidated sales, is expected to see flat volume growth due to rising competitive pressures. The other parts of the global business, which are grouped under Godrej Africa, USA, and the Middle East, are expected to maintain their growth momentum, delivering double-digit value and volume growth, alongside robust margins. The company has maintained its guidance of high-single-digit consolidated revenue growth, driven by mid-to-high-single-digit volumes for the standalone business in FY26. The pre-quarter update and the strong near-term outlook are expected to support the stock.