Godrej Consumer (GCPL) has re-entered the domestic ~INR3bn air care market (growing at over 20% YoY) via launch of ‘aer’. The company had exited the segment post Sara Lee (JV partner) sold its personal care business to P&G in 2010. Backed by strong marketing through television commercials, digital media promotion and on ground consumer initiatives, the range of products will be available at INR225 for the diffuser pack, INR299 for dashboard perfume and INR110 for aerosol products; priced at 20% premium to competitors in the category. Also, with increasing consciousness amongst consumers to enhance their lifestyle, we believe this re-entry is likely to be a new growth driver for GCPL and will also strengthen its home care portfolio. Maintain ‘BUY’.
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Pricing premium to competitors
GCPL has re-entered the domestic air care market with the launch of ‘aer’. The brand will be available in three variants—cool surf blue, petal crush pink and fresh lush green—and has been priced at a premium to competitors as the product has been positioned with special focus on fragrance and designing.
Entry into high-growth segment to strengthen portfolio
The domestic air care market is posting high growth of over 20% YoY. However, GCPL will face competition from well established players like Dabur through its brand Odonil, P&G through Ambi Pur and Reckitt Benckiser through Air Wick. We expect the company to expand the market as currently it is in infancy. GCPL is already present in the air care market in Indonesia through its brand Stella (market leader) and the technical knowhow is likely to benefit GCPL in the India market.
Outlook and valuations: Positive; maintain ‘BUY’
We remain positive on GCPL. However, key concern remains shortage of rainfall which may shrink rural consumption. At CMP, the stock is trading at 27.0x and 22.4x FY13E and FY14E, respectively. We reiterate ‘BUY’ on the stock and recommend ‘Sector Outperformer’ rating on a relative return basis.
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