At GCPL, volumes are the focus
₹48 crore. This is far lower than the run rate of ₹75-80 crore based on FY23 full year revenue. What is more, the increase in advertisement spends here led the vertical to post an Ebitda loss.
As such, Raymond’s advertisement spends may remain elevated. However, GCPL has maintained its guidance of flat revenue for FY24 and high single-digit Ebitda margin. To be sure, GCPL’s advertisement spending as a percentage of sales in the domestic business was 12.5% in Q1.
Analysts at JM Financial Institutional Securities note that this is now higher versus any of its home & personal care peers including Hindustan Unilever Ltd. “This speaks of the seriousness of its category development intent," said JM Financial analysts in a report on 7 August. Having said that, GCPL’s margin path demands attention, especially when it said it won’t hesitate to increase media spends if they see good return on investment.
Overall, GCPL’s consolidated Ebitda margin in Q1 expanded 273 bps year-on-year to 19.8%. In a bid to support volume growth and extract logistics-related savings, GCPL plans to invest about ₹900 crore in organic manufacturing capital expenditure in India over the next 18 to 36 months. “Step-up in media spends reflect growth agenda with hefty India capital expenditure suggesting management confidence on growth," said analysts at Jefferies India in a report on 8 August.
Investors are sitting on good returns as the GCPL stock is up by 15.5% year-to-date. The stock trades at 39 times its FY25 estimated earnings, according to Bloomberg data. Valuations are lower vis-à-vis some peers.
Palm oil prices are monitorable. GCPL said the prices have strengthened a bit recently but they are lower year-on-year. Consistent momentum in HI business
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