Project Report on Godrej Consumer Products Limited-Marketing Strategy
SWOT Analysis of Godrej Consumer Products Limited
Dissertation Proposal on Godrej Consumer Products Limited-Marketing Strategy
Godrej Consumer Products Ltd. is looking for acquisition opportunities in China, Latin America and the Middle East. The company is looking to scale up annual revenue from its international business to 50% from the present 23%. Godrej Consumer has appointed merchant bankers and is in talks with potential targets to close a deal. Godrej is particularly targeting companies which have a strong presence in the color and soaps
segment of their local markets. Company has a dedicated team working with merchant bankers for acquisitions. While company does not have a war chest, it have good relationship with banks and raising debt will not be a problem. Company is open to deals which are valued up to Rs.10 billion. International valuations are at an all-time low and several attractive companies are now available.
segment of their local markets. Company has a dedicated team working with merchant bankers for acquisitions. While company does not have a war chest, it have good relationship with banks and raising debt will not be a problem. Company is open to deals which are valued up to Rs.10 billion. International valuations are at an all-time low and several attractive companies are now available.
Outlook and Conclusion
At the current market price of Rs.219.00, the stock is trading at 27.34 x and 24.1 x for FY10E and FY11E respectively. Price to Book Value of the stock is expected to be at 7.28 x and 5.59 x respectively for FY10E and FY11E.
Earning per share (EPS) of the company for the earnings for FY10E and FY11E is seen at Rs.8.01 and Rs.9.09 respectively.
The top and bottom line of the company is expected to grow at a CAGR of 18% and 14% over 2008 to 2011E.
On the basis of EV/EBITDA, the stock trades at 1914.08 x for FY10E and 16.97 x for FY11E.
Company is debt very low so it is good indication to company in its financials.
We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.252.00 for Medium to Long term investment.
Industry Overview FMCG sector:
Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this category include all consumables (other than groceries/pulses) people buy at regular intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff and household accessories and extends to certain electronic goods. These items are meant for daily of frequent consumption and have a high return.
A major portion of the monthly budget of each household is reserved for FMCG products. The volume of money circulated in the economy against FMCG products is very high, as the number of products the
consumer use is very high. Competition in the FMCG sector is very high resulting in high pressure on margins
FMCG companies maintain intense distribution network. Companies spend a large portion of their budget on maintaining distribution networks. New entrants who wish to bring their products in the national level need to invest huge sums of money on promoting brands. Manufacturing can be outsourced. A recent phenomenon in the sector was entry of multinationals and cheaper imports. Also the market is more pressurized with presence of local players in rural areas and state brands
Scope of the Sector
The Indian FMCG sector with a market size of US$13.1 billion is the fourth largest sector in the economy. A well-established distribution network, intense competition between the organized and unorganized segments
characterizes the sector. FMCG Sector is expected to grow by over 60% by 2010. That will translate into an annual growth of 10% over a 5-year period. It has been estimated that FMCG sector will rise from around Rs 56,500 crores in 2005 to Rs 92,100 crores in 2010. Hair care, household care, male grooming,
female hygiene, and the chocolates and confectionery categories are estimated to be the fastest growing segments, says an HSBC report. Though the sector witnessed a slower growth in 2002-2004, it has been able to make a fine recovery since then.
characterizes the sector. FMCG Sector is expected to grow by over 60% by 2010. That will translate into an annual growth of 10% over a 5-year period. It has been estimated that FMCG sector will rise from around Rs 56,500 crores in 2005 to Rs 92,100 crores in 2010. Hair care, household care, male grooming,
female hygiene, and the chocolates and confectionery categories are estimated to be the fastest growing segments, says an HSBC report. Though the sector witnessed a slower growth in 2002-2004, it has been able to make a fine recovery since then.
Growth Prospects
With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG companies. Better infrastructure facilities will improve their supply chain. FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth. And if the companies are able to change the mindset of the consumers, i.e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near future. It is expected that the rural income will rise in 2007, boosting purchasing power in the countryside.
However, the demand in urban areas would be the key growth driver over the long term. Also, increase in the urban population, along with increase in income levels and the availability of new categories, would help the urban areas maintain their position in terms of consumption. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas
Indian Competitiveness and Comparison with the World Markets
The following factors make India a competitive player in FMCG sector:
• Availability of raw materials
Because of the diverse agro-climatic conditions in India, there is a large raw material base suitable for food processing industries. India is the largest producer of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat and fruits &vegetables. India also produces caustic soda and soda ash, which are required for the production of soaps and detergents. The availability of these raw materials gives India the location advantage.
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