Shares of Godrej Consumer Products plunged nearly 7% on Tuesday after a host of brokerages, including Credit Suisse, Deutsche Bank and CLSA downgraded the stock on lower than expected earnings for the April-June quarter. The stock closed 6.8% down to Rs 964.25 on the BSE. Tuesday marked the stock’s biggest single-day fall since September 2008. Credit Suisse downgraded the stock to ‘neutral’ from ‘outperform’ and observed that the core of the business in Indonesia is under pressure which will impact growth adversely in FY18 while steep valuations leave little room for upside.
Motilal Oswal maintained its Neutral rating on the stock indicating that at 42 times the FY19 expected earnings per share (EPS), the stock is not undervalued. The shares of the company extended the fall for the second day after the announcement of the results, resulting in a market cap erosion of Rs 6,257 crore in two days. The shares had fallen 2% on Monday. The net profit for the quarter declined 8.4% to Rs 225 crore. Bloomberg had indicated a consensus estimate of Rs 272.80 crore for the quarter. The net revenue of the company rose 2.8% to Rs 2,172.75 crore. The company attributed the weak profit to low sales after GST and lower consumer spending in its Indonesia market which dragged down its international business. Indonesia — once among the best-performing overseas businesses — had a relatively weak quarter due to the Lebaran holidays.
“Some of the macroeconomic challenges continue, as they’re shown by the results of some of the other companies in Indonesia, we also had 10% less trading days due to the Lebaran holidays, which were in July 2016 last year and we also saw some intense sales promotions by competition,” said Vivek Gambhir, MD & CEO, post Q1 results.