Godrej Industries Stock Surges 41% in a Year- Is It a Smart Investment in 2024?
Business and Industry Overview:
Godrej Industries Group (GIG) is an Indian conglomerate founded in 1897 by Ardeshir Godrej. It has a long history of innovation and social impact. The company supported India’s freedom movement and created the world’s first vegetable oil-based soap in 1918. It also made ballot boxes for India’s first election in 1951. Today, GIG earns $6.1 billion in revenue and has a $27.5 billion market value (as of March 31, 2024). It serves over 1.1 billion people worldwide. The company operates in many industries, but these are the main streams of revenue:
- Consumer Products—It is a leader in home and personal care across Asia, Africa, and Latin America. Its products include home care, Air fresheners, fabric Care, and personal care products like shampoo and hair color.
- Real Estate – It is one of India’s top developers, known for sustainability and innovation. The company is into real estate. In 9MFY24, it added 1 group housing project in Bengaluru with an estimated booking value of ₹ 1,250 crores.
- Agriculture – It helps farmers with animal feed, palm oil, and other solutions. This includes animal feed, vegetable oil, dairy, and crop protection business.
- Chemicals – It is a major producer of oleochemicals and speciality chemicals. This includes Fatty Alcohols, Surfactants, Glycerin, and Fatty Acids.
- Finance & Investments – It includes real estate private equity and a growing financial services business.
Godrej Industries is one of the holding companies of the Godrej Group. It is one of the leading manufacturers of oleochemicals on a standalone basis. Godrej Industries is the promoter of Godrej Agrovet Ltd. and Godrej Properties Ltd. It also has a stake in Godrej Consumer Products Ltd. The company focuses on sustainability and social responsibility. Godrej Good & Green works on environmental and community projects. Godrej DEI Lab promotes diversity and inclusion in the workplace. With a strong legacy and focus on the future, Godrej continues to grow while making a positive impact.
Latest Stock News:
- Stock Performance: On February 21, Godrej Industries saw a massive surge in trading volume, reaching 176.85 lakh shares, 17.25 times the two-week average. The stock rose 9.39% to ₹1,106.75 but ended at ₹812.10, down 3.08% on BSE.
- Recent Gains & Valuation: The stock jumped 29% last month and 41% over the year, but its high P/E ratio of 78.5x raises concerns, especially with a 28% drop in earnings last year. While EPS grew 18% over three years, it lags behind the market’s expected 25% growth.
- Financial Performance: In Q3FY24, revenue surged 34.4% YoY to ₹4,824.8 crore, while net profit soared 76.9% YoY to ₹188.2 crore. EBITDA more than doubled, rising 113.75% YoY to ₹596.8 crore, with margins improving from 7.8% to 12.4%.
- Godrej Consumer Products (GCPL): It reported a 14% YoY drop in net profit due to temporary challenges. However, sales grew 6%, with home care revenue up 4% and strong growth in air fresheners and fabric care.
Despite strong financials, high valuation, and weak earnings growth, the stock is a risky bet unless performance improves.
Potentials:
Godrej Enterprises Group (GEG) is investing ₹4,000 crore to improve its businesses and make operations more efficient across 14 different sectors. This move is also aimed at unlocking the value of its real estate holdings, especially in Mumbai.
According to Nyrika Holkar, Executive Director of GEG, the company wants to expand its businesses, improve decision-making, and operate with more agility. The goal is to strengthen its consumer-first and nation-first approach, ensuring better products and services while growing strategically. It plans to pour money into:
- Consumer-Focused Businesses—This includes furniture, security, and locks. The Interior furniture brand will evolve into a lifestyle brand with advanced engineering support.
- Key Industries for India—Investment will also go into aerospace and process engineering, which are important for national growth.
- Real Estate: A major focus will be on developing land in Vikhroli, Mumbai, which holds significant value for the group’s plans.
GEG operates in aerospace, appliances, engines, energy, security, building materials, construction, healthcare, and furniture. Right now, the biggest revenue earners are appliances and interior design, followed by locks and security. With this investment, GEG aims to grow faster, improve efficiency, and create long-term value for its businesses and assets.
Analyst Insights:
Key Financial Metrics:
- Revenue (Q3FY24): ₹4,824.8 crore (+34.4% YoY)
- Net Profit (Q3FY24): ₹188.2 crore (+76.9% YoY)
- EBITDA: ₹596.8 crore (+113.75% YoY)
- EBITDA Margin: 12.4% (up from 7.8%)
- Market Cap: ₹27.5 billion (as of March 2024)
- P/E Ratio: 78.5x (very high compared to peers)
The company’s stock is trading at 4.49 times its book value, suggesting high growth expectations but also potential overvaluation. Despite consistent profits, it is not paying dividends, indicating reinvestment but offering no direct returns to shareholders. Promoter holding has dropped by 1.95%, which may signal reduced confidence from key stakeholders. Additionally, the company has a low return on equity (6.83% over three years), meaning it is not generating strong returns on shareholder investments. There are also concerns about capitalizing interest costs, which could artificially boost profits. A significant part of its earnings comes from other income (₹2,482 Cr) rather than core operations, raising questions about sustainability. Overall, while the company shows growth potential, its high valuation, weak profitability, and reliance on non-core income make it a risky investment.
Godrej Industries has shown strong revenue and profit growth, but its high valuation is a concern. The P/E ratio of 78.5x suggests the stock is expensive compared to earnings. Additionally, earnings declined 28% last year, and promoter holdings dropped 1.95%, which could signal caution.
It is better to hold the stock. The company has strong financials but is overvalued and earnings growth is slow. If earnings improve, the stock may justify its high price, but for now, waiting is the best option. If you already own the stock, it’s best to wait and watch rather than sell because the company is still growing.
If investors are thinking of buying, it’s too expensive right now, and better opportunities may come if the price drops or earnings improve.
