Colgate-Palmolive (India) Ltd. share price target

Colgate's 4QFY18 volume growth was a tad below our forecast at 4% - on a soft comparator, though (volume had declined 3% in 4Q LY due to the continued impact of demonetisation). Overall revenue, though, was significantly lower (470bps) vs expectations due to a rather sharp deceleration in net realisation growth to merely 1% in 4Q vs 4-6% in past 6M - possibly a function of Colgate's pre-GST price-hike having now anniversarised. On the positive side, toothpaste market share appears to have now stabilised for past 9M at c.53% without any incremental loss therein. On the flip side, management is pointing to a volume growth trajectory of just 4-5% level for the company going forward, which is a tad...

We value Colgate based on P/E of 35x (earlier 34x) on Mar-20 EPS to arrive at a TP of 1,204. We upgrade our rating to BUY from NEUTRAL. We met the management of Colgate-Palmolive India (Colgate) to discuss (1) Recovery in the oral care market (2) Analysing Colgates market share losses in toothpaste and toothbrush (3) Colgates counter strategy to stabilize and regain market share (4) Health of the trade channels (5) Scope of entering new categories (pollination of global products)

Q3 above expectations: Net sales, EBITDA and Adj. PAT grew 19%, 32% and 30%, vs. consensus expectation of 17%, 23% and 24%. Volume grew 12% YoY. Gross margin expansion with positive operating leverage absorbed effect of higher A&P; spends (+48% absolute)

We value Colgate based on P/E of 34x on Dec-19 EPS to arrive at a TP of 1,163. We maintain NEUTRAL. Colgate-Palmolive India (Colgate) registered 12/18% volume/revenue growth vs. our expectation of 13.5/16%, respectively. Premiumisation, favorable base & op-lev led to healthy EBITDA/PAT growth of 32/34% respectively (vs. expectation of 21/24%).

Colgate-Palmolive reported 4.6% YoY (18.7% on a comparable base) growth in revenue to | 1033.0 crore (I-direct Estimate 1091.4 crore) with the strong volume growth of 12% aided by low base quarter impacted due to demonetisation. In corresponding quarter, net sales declined by 8.6% and volume were down by ~12%. The company maintained its leadership position with 53.7% and 45.1% market share in toothpaste and toothbrush categories, respectively. However, it is losing market share in toothpaste...

CLGT's volumes grew 12% YoY (est. of +10%) in 3QFY18. Net sales grew 18.2% YoY to INR10.8b (est. of INR9.8b), while EBITDA was up 31.9% YoY (est. of +18.5%) to INR2.8b. Adj. PAT grew 33.5% YoY (est. of +17.2%) to INR1.7b. Market share shrunk in toothpaste category by 170bp YoY (-30bp QoQ) to 53.7% and in toothbrush category by 190bp YoY (-40bp QoQ) to 45.1%. Gross margin continued to expand (+130bp YoY to 65.2% v/s est. of 64.2%). High ad spends (+210bp YoY to 11.7%) were entirely offset by a sharp decrease in other expenses (-340bp YoY to 18.9%) and lower staff cost (-20bp YoY to 7.3%). Thus, the EBITDA margin expanded 290bp YoY to 27.3% (est. of 25.8%). Nine-month performance:Sales, EBITDA and adj. PAT grew 5.3%, 14.9% and 11.4%, respectively. Gross and EBITDA margin expanded 100bp YoY (to 64%) and 220bp YoY (to 26%), respectively.

Revenue increased by 11.2% to Rs. 1077.98 Cr in Q2FY18 when compared to the previous quarter Revenue increased by 11.2% to Rs. 1077.98 Cr in Q2FY18 when compared to the previous quarter

Colgate-Palmolive has posted a decent set of numbers in 2QFY18 with its revenues and EBITDA beating our estimates by 3% YoY and 8% YoY, respectively. While net sales came in at Rs10.8bn, EBITDA and net profit stood at Rs2.9bn and Rs1.8bn, respectively. Although reported net profit fell by 2.1% YoY to Rs1.8bn, adjusted net profit grew by 5% YoY excluding the impact of prior period tax reversal. Expecting the Company to report 10.5% revenue and 13.5% earnings CAGR...

Colgate-Palmolive posted healthy results in Q2 with the 2.8% growth in sales despite ~9% cut in prices in July. The price cut came in the wake of passing on of GST benefit to consumers. The company reported a 150 bps improvements in margins with the controlled spend towards advertisement in a volatile trade environment. With the higher tax outgo, net profit declined 2.1% YoY to | 177.6 crore With the disruption at the wholesale network due to transition to GST, CPIL witnessed ~1% YoY decline in volumes. However, we...