Godrej Consumer Products (GCPL)’s messaging in its call with analysts to share insights on Indonesia business is broadly in sync with our assumptions for the geography – double-digit revenue growth in core categories driven by distribution expansion and strong innovation pipeline and margins to sustain in a band, near-term RM pressure notwithstanding. It also indicated upside from entry into hair care and potential M&A opportunities. Retain reduce.
GCPL hosted a call to share update/insights on its Indonesia business; key takeaways were –
1) Core categories form 90% of Indonesia business. Godrej Indonesia derives 40% revenues from HI category, 30% from air fresheners and 20% from wipes and non-core categories like specialized fabric care (bleach) and scourers and car care form remaining 10%.
2) Unique distribution model; plan to double reach in next five years.
3) Core categories on steady footing. (1) HI to benefit from double-digit growth in electrical/aerosols segment (GCPL’s core) plus upside from expansion in coils/repellants via new formats, (2) air fresheners category growth rates remain strong in double digits and (3) wipes to be driven by market share gains.
4) Entry into hair care, MT expansion and potential MA& additional revenue kickers. GCPL plans to launch hair care products in Indonesia in FY2017 backed by innovative formats.