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Wednesday, June 17, 2009

Godrej Consumer Products (GCPL) - Defensive Large Cap FMCG Stock To Buy

Attractive valuations and consistent growth in revenues and profits make Godrej Consumer Products (GCPL) a value pick for investors looking at medium-term growth, along with timely high stock dividend returns.

GCPL, the personal and household care offshoot of the 110-year old Godrej group, is one of the leading companies in the personal care segment in India. It manufactures and markets soaps, hair colour, liquid detergents and toiletries, with the soap segment contributing around 60% to its revenues. It markets soaps under the brand names Godrej No 1, Cinthol, Fairglow and Evita.

The company also owns Keyline Brands, a UK-based FMCG company. This gives it access to global brands and trademarks in Europe, Australia and Canada. GCPL also owns several international brands in African countries through its acquisition of South African company Rapidol. The company has been diversifying its product mix by launching new products like shampoo and facewash. Meanwhile, GCPL continues to grow its topline and bottomline through select acquisitions in the international market.


These are part of GCPL''s long-term plan to establish a strong presence in developing markets in Asia, Africa and Latin America.The company is also reshuffling its products portfolio to meet the changing needs of consumers. Its liquid detergent has been re-launched in new convenient bottles, while a new powder hair dye has been launched to boost sales of the lacklustre hair dye category.

CMP 166 Rs.
Market Cap 4,265.43
EPS (TTM) 6.29
P/E 26.39
P/C 24.23
Book Value 21.30
Price/Book 7.79
Div(%) 400.00
Div Yield(%) 2.41
Market Lot 1.00
Face Value 1.00
Industry P/E 24.99

Besides low valuations, its consistent and high dividend payouts also make it a worthwhile investment bet.

Historically, dividend payout has grown at a higher rate than its profit and revenues. A bullish demand outlook, lower valuations, an effective business model and above all, a distinguished pedigree make the company a must-have defensive stock in an investor''s portfolio.

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