Brokerage firm JPMorgan believes that Godrej Consumer Products can outperform its peers going forward and has hence retained its “outperform” rating on the stock with a price target of ₹1,365.

JPMorgan’s price target implies a potential upside of 23% from Friday’s closing levels for GCPL.

GCPL shares fell over 8% last Monday, December 9, after the company spoke about subdued demand trends in a mid-quarter update and warned of some pressure on margins due to inflationary trends in raw material prices.

The stock has declined over 28% from its recent peak of ₹1,541. On a year-to-date basis too, the stock has been an underperformer, with a fall of 3% so far.

JPMorgan believes that this sharp sell-off has made the stock’s risk-reward more reasonable and it expects GCPL to outperform its peers going forward.

In an analyst call, GCPL’s CFO said that 85% to 90% of the volume deceleration has been due to cyclical factors and is not suggestive of structural demand challenges or a broader moderation in consumption.

Volumes have been flat for the company so far in the second half of the financial year, compared to a 7% growth in the first half.

While rural markets continue to track ahead of urban, GCPL expects volumes of the soap business to return to normative levels over the next two quarters. The recovery is subject to no further increase in the prices of crude palm oil.

The CFO also said that headline inflation could see a faster recovery in the March quarter if seasonality trends remain normal, according to JPMorgan’s note.

Among the 36 analysts that have coverage on GCPL, 26 of them have a “buy” rating, seven of them say “hold”, while three have a “sell” rating on the stock.

Shares of GCPL had ended little changed on Monday at ₹1,109.6.