Colgate-Palmolive (India) Ltd. share price target

Rural sales is growing slower than Urban sales, recovery hinges on monsoons. We cut our EPS estimates for FY20 and FY21 by 3.1% and 2.9% due to 1) 4% domestic volume growth on a low base (4% in 1QFY19) 2) Inability to arrest decline in toothpaste market share (down ~30bps YTD) 3) heightened competitive intensity and trade promotions. Colgate is pinning hopes on...

Although CLGT expects a demand recovery in the coming quarters, near-term volume growth is likely to be in mid-single-digits, despite stability attained in market share in the previous quarter. CLGTs high rural and wholesale exposure means that near-term volume growth is likely to be in mid-single-digits, despite stability attained in market share in the previous quarter. However, a few factors are in CLGTs favor from the medium-term perspective (a) the toothpaste market share hemorrhage appears to have abated after three years, (b) there is evident traction driven by herbal and other launches and (c) valuations are relatively less expensive at ~35x FY21E EPS, ~7% discount to our ex-cigarette and alcohol consumer peer valuations. However, a few factors are in CLGTs favor from the medium-term perspective (a) the toothpaste market share hemorrhage appears to have abated after three years, (b) there is evident traction driven by herbal and other launches and (c) valuations are relatively less expensive at ~35x FY21E EPS, ~7% discount to our ex-cigarette and alcohol consumer peer valuations.

Colgate has attained the first step towards recovery i.e. stabilizing market share. Hereon, the co. needs to consolidate its position and return to market share gains. As a category leader, Colgate needs to drive category growth at a time when natural's fad is moderating. We believe the co. is taking the right steps (although at a modest pace) i.e. (a) Improving brand visibility (new TVC campaigns, in-store activations etc), (b) Re-launches of flagship products, (c) Regional based strategies (tastes and incomes), (d) Focus on low unit packs (drive sampling) and (e) Higher promotions (via multi-unit packs). We model partial recovery in volume growth and market share in FY20-21E. With limited upside, we remain NEUTRAL on the company. Colgates 4Q performance was slightly below our estimates (volumes and margins). Key positive is that market share has now begun to stabilize over 2HFY19. However, oral care category growth continues to trail FMCG sector. As a result, we dont expect the co. to deliver high-single digit to low double digit volume growth unless it begins to gain significant market share (low probability). We maintain NEUTRAL and value the co. at 35x on Mar-21 EPS, arriving at a TP of Rs 1,227.

Volume led growth quarter; Naturals' portfolio outperforms CPIL has been able to maintain its toothpaste volume market share at 52% and increase its toothbrush market share by 280 bps to 48% on a YoY basis. CPIL posted ~6% topline growth largely driven by volume growth of 5%. Colgate's volume growth has improved in past few quarters (7% each in Q2Q3FY19) primarily driven by new launches in the naturals' portfolio. CPIL has aggressively increased its promotional spend to drive growth in its 'Naturals' and overall toothpaste portfolios. In naturals, CPIL has increased its volume market share by 120 bps YoY to 8.1%. We expect naturals' portfolio...

The Q4FY19 results were in line with our expectation. On a base of 4%, the company was able to post a 5% volume growth. We view this as a strong performance, considering the slowdown in most consumer categories and intense competition in the oral care category. We attribute the improvement in volume performance to the recent launch of Swarna...

ICICI Securities Ltd | Retail Equity Research On an unfavourable base of 12% volume growth, CPIL was able to post 7% volume growth in Q3FY19 EBITDA margins improved 123 bps to 28.6% on account of 79 bps decline in employee costs to sales, 22 bps decline in advertisement spend to sales & 30 bps fall in miscellaneous expenses to sales...

Despite building healthy recovery, we arrive at a NEUTRAL rating. We value based on P/E of 35x on Dec-20 EPS with TP of Rs 1,254. Colgate reported an in-line quarter with revenue growth of 6.5% (exp. 8.5%) driven by volume growth of 7% (exp. 6.5%). The co. has increased its trade and consumer promotional intensity resulting in softer revenue growth and gross margin pressure. EBITDA/APAT grew by 11/13% (exp. 10/12%).

CLGT sustained positive volume growth for 5th consecutive quarter and sustained market share (52.5% for April Dec and April Sept2018) aided by higher consumer and trade promotions. Colgate CDC, Max fresh and Swarna...

Net sales came in line growing 6.4% YoY to INR11b (est. EBITDA was up 11.2% YoY to INR3.1b (est. INR2.9b), while Adj. PAT grew 12.6% YoY to INR1.9b (est.

Colgate-Palmolive India Ltd (CPIL) reported decent numbers for Q2FY19, in line with our expectation. Its revenue grew by 7.7% yoy driven by volume growth. Its EBITDA and PAT grew by 9.6% and 10.6% yoy respectively due to decrease in employee expense and cost efficiency.