Rating: REDUCE | CMP: Rs1,275 | TP: Rs1,159
September 3, 2019 Downgrade to reduce on poor growth visibility
Company Update Quick Pointers:
☑ Change in Estimates | ☑ Target | ☑ Reco . 1Q20 toothpaste exit market share at 10-year low with 1.3% tonnage growth
Change in Estimates . Revival looks tough as naturals drive category growth (Colgate’s weakness) Current Previous FY20E FY21E FY20E FY21E . Palmolive Facial bars unlikely to scale up given niche positioning and high price Rating REDUCE HOLD Target Price 1,159 1,208 Sales (Rs. m) 47,712 52,036 48,069 52,617 We downgrade Colgate Palmolive from Hold to Reduce and cut EPS estimates % Chng. (0.7) (1.1) of FY20-21 by 0.9-1.3% given 1) 10- year low 1Q20 exit market share 2) 1Q EBITDA (Rs. m) 13,931 15,113 14,039 15,286 % Chng. (0.8) (1.1) tonnage volume growth of just 1.3% and 3) slowdown in toothpaste segment EPS (Rs.) 29.1 32.4 29.4 32.9 except naturals. However, Colgate is making a push for volumes led by 1) % Chng. (0.9) (1.3) 30% increase in direct distribution 2) bringing family pack prices of Total closer to CDC and 3) more offers in bundled packs. Instead of being more Key Financials - Standalone aggressive for volume growth and market share expansion, Colgate has Y/e Mar FY18 FY19 FY20E FY21E taken 6-8% price increase post GST and operates at lifetime high margins. We Sales (Rs. m) 41,880 44,624 47,712 52,036 EBITDA (Rs. m) 11,124 12,361 13,931 15,113 believe Colgate’s intent to achieve 6-7% volume growth looks difficult given Margin (%) 26.6 27.7 29.2 29.0 its weak positioning in high growth naturals segment and intense competition PAT (Rs. m) 6,595 7,164 7,914 8,824 from Dabur, Patanjali and other players in the naturals segment. EPS (Rs.) 24.2 26.3 29.1 32.4 Gr. (%) 14.2 8.6 10.5 11.5 DPS (Rs.) 13.0 15.0 20.0 25.0 Although Colgate is indicating intent to grow personal care business (5% of Yield (%) 1.0 1.2 1.6 2.0 sales), its focus on niche premium segments (hand and body wash and now RoE (%) 47.1 48.2 52.1 59.3 Palmolive Facial bars) remains a hurdle. We believe CLGT will continue to RoCE (%) 68.3 72.4 78.1 88.6 EV/Sales (x) 8.2 7.7 7.2 6.6 trade at a discount to peers due to single category dependence and sustained EV/EBITDA (x) 30.8 27.8 24.5 22.7 loss of share in key category. We value the stock at 35xJune21 EPS (36x PE (x) 52.6 48.4 43.8 39.3 P/BV (x) 22.7 23.9 21.8 24.9 earlier) and cut target price to Rs1160 (Rs1208 earlier). Downgrade to Reduce.
. Toothpaste market share ~10-year low at sub 50%: Colgate’s exit market Key Data COLG.BO | CLGT IN share in 1Q20 has dipped below 50%, a 10-year low. Given ~88% category 52-W High / Low Rs.1,356 / Rs.1,011 penetration and Colgate’s dominant market share, sustained market share gain Sensex / Nifty 37,333 / 11,023 Market Cap Rs.347bn/ $ 4,844m is key to achieving reasonable growth. Although CLGT has seen reasonable Shares Outstanding 272m success in Swarna Vedshakti, it has not been able to neutralize the market 3M Avg. Daily Value Rs.1070.32m share loss in Total and Sensitive. Given weak position of Colgate in naturals segment (15% growth), gaining back market share looks difficult. Shareholding Pattern (%) Promoter’s 51.00 . Oral Care: Slew of measures to revive growth: Colgate has taken several Foreign 15.37 Domestic Institution 10.18 measures to revive volume growth which include 1) 30% increase in direct Public & Others 23.45 distribution in FY19 and similar increase expected in FY20 2) reduction in pack Promoter Pledge (Rs bn) - size of Total to bring outgo in line with other brands like CDC and Active Salt 3) increased for bundled packs in CDC, Total and Swarna Vedshakti and 4) Stock Performance (%) gradual increase in pack size of LUP’s. Despite poor volumes and competitive 1M 6M 12M Absolute 9.1 2.1 11.3 intensity, all time high margins and 6-8% price increase suggest margin centric Relative 9.2 (1.9) 15.3 approach of the company.
Amnish Aggarwal . Personal care remains a pipe dream: Although Colgate has identified [email protected] | 91-22-66322233 Personal care as a key focus area, its focus on premium products in niche Nishita Doshi categories remains an issue. We believe launch of Palmolive facial bars at [email protected] | 91-22-66322381 Rs60/75gm is unlikely to compete as it competes with Dove, Fiama Di wills and host of other premium products. We believe that current pace of launches and strategy is unlikely to scale up the personal care business in medium term.
September 3, 2019 1 Colgate Palmolive
Oral Care: Will the Volume push work?
Given that oral care is more than 95% of sales for Colgate, growth in this category is imperative for company growth. This is more so as Colgate is operating at lifetime high gross and EBIDTA margins of 65.1% and 27.7%. Colgate has initiated several steps to push growth rates in toothpaste segment:
30% increase in direct coverage in 2018
CLGT has been steadily increasing its distribution reach. Post demonetization and GST, the wholesale channel has come under severe pressure due to regulatory and liquidity concerns. Colgate has renewed its efforts to bolster its distribution by 1) increasing direct coverage by 30% in CY18 and is targeting another 30% increase in CY19 2) it has increased indirect reach from 5mn outlets to 6mn in past two years. We believe reduced reliance on wholesale channel is long term positive as CLGT tends to be at a disadvantage in comparison to peers given limited width of its product portfolio. Direct reach will enable the company to place better assortments in the trade channel and improve penetration of premium products.
Colgate plans to increase direct coverage by 1.3xCY18 in 2019
Direct reach indexed to CY12
350 299 300
250 230
200 180
150 100 100
50
0 CY12 CY17 CY18 CY19
Source: Company, PL
Rejig in Grammage and pricing strategy
Colgate has been on the receiving end with loss of more than 800bps market share since naturals wave picked up (led by Patanjali and Dabur). Past few years have seen naturals segment growing in high double digits even as other segments in toothpaste have suffered. Colgate has now devised a multi-pronged strategy to push for volumes in the toothpaste segment.
. Premiumisation back on track: Naturals segment growth has softened to ~15%, although it is still growing far ahead of the category. After a gap of 4 years premium multi benefit segment (Total and Sensitive) is showing some signs of revival and consumer interest. Colgate is well placed to capitalize on the same given strong brands and value added variants in the segment.
September 3, 2019 2 Colgate Palmolive
. Improving affordability with smaller pack sizes: Colgate has launched smaller packs of premium brands like Total and Sensitive to increase their affordability. Colgate reduced the pack size of Total from 150gm to 140gms and now to 120gms, to bring the MRP (Rs92) below Rs100 and is in line with the pricing of 200gms of family packs of Colgate Dental cream and Active salt. This will enable the company enable sift from mass segment family toothpaste to premium offering like Total which has been on the receiving end due to pick up in the Naturals segment.
. Volume push with bundled packs: Colgate has increased consumer discounts and offerings to push volumes through offers like 1+1 or a free smaller SKU or free toothbrush. Our channel checks suggest that the shelf space occupied by all the major brands was maximum for bundled packs. CDC is giving 100gm free on bundled pack of two tubes of 200gm each. Colgate Total has 2 packs of 120gms each and 1 pack of 65gms free. Swarna Vedshakti is giving Rs17 off on two packs of 200gm each.
Bundled packs occupy the highest shelf space
Source: Company, PL
. LUP’s are becoming bigger: Even as Colgate has made bigger pack sizes smaller in a few brands like Total, it is gradually increasing the size of low unit packs. Rs5 pack of CDC has been gradually phased out and replaced by Rs10 pack. The company is toying with the idea of shifting the LUP price point to Rs15-20 over a period of time. The larger sized LUP’s will push volume growth higher and also induce brushing habit amongst people.
September 3, 2019 3 Colgate Palmolive
Toothpaste segment hit on various fronts
Colgate market share at ~10-year low, touches sub 50% levels
Colgate Palmolive closed 1QFY20 with sub 50% volume market share in toothpaste, lowest since 3QFY09 (49.6%) with value share being 20/30bps lower than volume share. Colgate has thus lost ~800bps of volume share in toothpaste (peak of 57.9% in 1HCY15) post shift to naturals segment led by Patanjali and Dabur. Although Colgate’s efforts and innovations curtailed the speed of decline in 2H18, it is far away from gaining back lost share (June 19 YTD Market share declined 20bps QoQ).
Colgate has lost ~800bps of market share in past 4 years
60
57.9
57.8
57.6 57.3
58 56.7
55.9
55.7
55.7
55.3 55.1
56 54.7
54 53.7
54 53.4
52.5
52.5
52.4 52
52 50 50 48
46
Toothpaste Volume Share (%) Share Volume Toothpaste
Apr- Dec 18 Dec Apr-
Jan - Apr 15 - Apr Jan
Jan - Apr 16 - Apr Jan
Jan - Apr 17 - Apr Jan
Jan - Mar 18 - Mar Jan
Apr- Sept 18 Sept Apr-
Jan - Dec 14 - Dec Jan
Jan - Sep 15 - Sep Jan
Jan - Dec 15 - Dec Jan
Jan - Dec 16 - Dec Jan
Jan - Aug 17 - Aug Jan
Jan - Dec 17 - Dec Jan
Jan - Sept 16 - Sept Jan
Jan - June 15 - June Jan
Jan - June 16 - June Jan
Jan - June 17 - June Jan
Jan - June 18 - June Jan Jan - June 19 - June Jan Apr- March 19 March Apr- Source: Company, PL
Aggressive competition pushes Colgate’s share below 50%
Colgate Dabur HUL Patanjali
60
56.8 57.2 50 54.5 56.1 55.5 52.2 53.3 52.7 53.6 52.4 48.8 49.4 50 40 25.1 30 24.6 22.8 22.6 23.3 23.5 22.8 21.7 19.8 19.2 17.7 17.3 18 20
14 15.3 15.4 15.1 15 10 14.8 14 13.4 13.4 11.9 12.2 12.9 13.7 0.1 0.4 0.6 1.2 2.9 6.8 8.6 8.6
Toothpaste Volume share % share Volume Toothpaste 0
YTD
CY07
CY08
CY09
CY10
CY11
CY12
CY13
CY14
CY15
CY16 CY17 CY18 Source: Company, PL
. Natural’s wave in the toothpaste segment has impacted Colgate massively as two of its most premium brands i.e. Colgate Total and Sensitive have lost share from a cumulative 7% to 3%. In addition, CLGT lost share in Cibaca and Active Salt. Loss of market share to mass priced Patanjali and Dabur Red (Rs75 and Rs86/200gm) from higher priced products (Total, Sensitive and Active Salt) shows down trading for product related efficacy and shift towards naturals.
September 3, 2019 4 Colgate Palmolive
. Colgate has strengthened its offering in the naturals segment by launch of Cibaca Vedshakti at the mass end as the brand has more resonance in North India (Patanjali’s strength), however it has not been able to make a major dent.
. Colgate’s Swarna Vedshakti is gaining traction, however, its premium pricing at Rs 92 for 200gms compared to Patanjali’s Dant Kanti (Rs 75/200gms) and Dabur Red (Rs86/200gms) limits the scope of market share gains.
Swarna Vedshakti is at a premium to Patanjali and Dabur Naturals Segment Grammage MRP Cibaca Vedshakti Economy 175gms 55 Patanjali Dant Kanti Popular 200gms 75 Swarna Vedshakti Popular 200gms 92 Dabur Red Popular 200gms 86 Vicco Vajradanti Popular 200gms 115 Source: Company, PL
Industry growth moderation in non-naturals negative for Colgate
Toothpaste market has been no exception to the current slowdown witnessed by various sectors. Toothpaste Industry volumes grew by ~6.5% in CY17 (on a low base of 2.1% and 0.1% in 2016 and 2015) and 7.7% in CY18, past three-year average also suggests sustainable volume growth of ~5-6%. Although per capita consumption in India at 180gm remains low, the expectation of volume growth led by twice a day brushing habit has not fructified so far. This coupled with high dentifrice penetration at over 90% means only mid- single digit volume growth for the Industry. Since past 3 years, category growth is being led by the naturals segment. Overall industry growth rate has moderated in past two quarters due to 1) moderation of growth rate in naturals segment from earlier ~18/20% to the current ~15% and 2) volume decline in non- naturals segment in since 4Q19.
We believe Colgate needs to lead industry growth and gain share in order to sustain volume growth in mid to high single digits, as it has close to 50% share of the market. Given that Colgate is facing stiff competition from Dabur and Patanjali, this looks like a daunting task to grow ahead of the market.
Toothpaste market growth is est at 6.5% in CY18
Industry Volume growth % 7.4 8 6.5
6
4 2.1 2 0.1 0 CY14 CY15 CY16 CY17 CY18E -2 -2.6 -4
Source: Company, PL
September 3, 2019 5 Colgate Palmolive
Volume growth basis shifted to packs, Adj volumes up 1.3% only
Colgate’s reported volume growth number was in tonnage till 4QFY19. However, the company has taken 2 rounds of grammage reduction in April and in June in price pointed packs of Rs10 and Rs20. Given that Rs10 packs are a good chunk of volumes in CDC, the tonnage volume growth does not reflect the exact growth in number of packs. Colgate has thus shifted to reporting of volume growth to dozens of toothpaste packs sold versus the previous year (1Q growth of 4%). Adjusting for this, the actual tonnage volumes grew by only ~1.3% in 1Q which was much lower than expectations. Colgate shall continue to report volumes in dozens of toothpaste packs basis in the coming quarters.
Equated volume Growth has moderated since January’19
15 12
10 7 7 5 4 5 4 4 4 4 5 3 3 3 1 -1 0
(%) -3 -5 -5
-10 -12
-15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19 1QFY20
Source: Company, PL
6-8% price increases post GST, margins at life time high
Colgate has benefitted from introduction of GST vis-à-vis competitors in the naturals space who were earlier facing lower taxation under excise and VAT. Colgate had reduced prices to pass on GST benefits to the customers when rates were cut from 28% to 18%. However, it has been gradually increasing prices after that, and the prices are up by 6-8% from post GST levels. We note that margin centric approach continues as Colgate’s gross margins increased by 150bps and EBIDTA by 100bps in the past 5 quarters to 65.9% and 27.6% respectively. We believe pricing strategy with focus on margins seems to ignore the sustained loss of market share and below industry average volume growth.
Prices almost nearing pre-GST levels Toothpaste Grammage Pre GST Post GST July'19 Colgate Herbal 200gms 95.00 88.00 93.00 Colgate Active Salt 200gms 96.00 90.00 95.00 Colgate Visible White Mint 100gms 95.00 88.00 93.00 Colgate CDC 100gms 52.00 46.00 50.00 Colgate Maxfresh Red 80gms 52.00 48.00 70gms for Rs48 Source: Company, PL
September 3, 2019 6 Colgate Palmolive
Personal care remains a pipe dream
Colgate has identified Personal care as their second leg of growth. It has shown a little bit of more seriousness in launching new products beyond oral care, however the pace and initiatives leave a lot to be desired and it has failed to scale up this portfolio with a steady 4-5% of sales contribution since the past 4 years.
More learnings from Parent company: The parent company has an array of offerings in personal care ranging hand wash, body wash, deodorants, lotions, facial bars etc. They have created multiple brands (Palmolive, Protex, Sanex, Softsoap, GARD, speed stick, Toms, Afta, Tahiti and Irish Spring) which cater to mass as well as premium segment which gives an edge to diversify and straddle through the price pyramid.
Parent receives 20% sales from Personal care Oral care dominates Colgate Palmolive India
Colgate Palmolive US (% of Sales CY18) Colgate Palmolive India (% of Sales FY19)
Pet nutrition 15% Personal care 4% Home Care Oral Care 18% 47%
Personal Oral Care care 96% 20%
Source: Company, PL Source: Company, PL
Colgate exited major personal care segments by 2001: Colgate has always been associated with Oral care in India. It has presence in a few adjacent categories like shampoo (Halo), Skin creams (Charmis) and Grooming (Palmolive Shaving cream). However, post liberalization of economy Colgate ventured into Toilet Soaps (Protex and Palmolive) initially at premium end and later took Palmolive to mass end. It also launched Axion Dish washing paste and Palmolive Optima shampoo. However, citing poor margin profile in soaps and limited success in shampoos, it exited both of these by 2001.
Colgate operates in hand wash and body wash in niche segments: Colgate made foray into skin care segment with hand and body washes under Palmolive brand and premium positioning. Although it was amongst first companies to enter the market, it was never able to scale that up when players like aggression by HUL, ITC etc. went aggressive in the market place across price segments. Colgate has been trying to skim the market and trying to find a niche in premium segment, which shows lack of risk taking tendency and commitment to broad base the sales mix of the company. Colgate has been avoiding to take players like HUL, P&G and Reckitt head-on, which has resulted in dependence on a single category.
It becomes difficult to replicate the global success as the Indian weather, taste and preferences are quite different and hence require tweaking and modifying the product characteristics. Currently, Colgate India imports products without any modifications resulting in lackluster success in the past 4 years.
September 3, 2019 7 Colgate Palmolive
Half-hearted effort in Facial bars: In FY19, Colgate launched Palmolive facial bars in the premium naturals segment to re-enter the toilet soap category that they had long ago exited in India. The product positioned on the herbal platform at Rs55/75gms. It has TFM of only 60% and is available in variants like Charcoal, Orange (Vitamin C&E) and Tamarind & Turmeric. We see little chances of success given that it competes with Dove (Rs50/100gm) Fiama gel Bars (Rs67/125gm) and Pears Herbal variants at (Rs64/125gm). The prices are on par/premium with other herbal brands like Boutique and Khadi. However, the half-hearted effort so far makes it highly unlikely for personal care to make any medium term impact.
Personal care has only 1 new product added in the past 8 years
Source: Company, PL
September 3, 2019 8 Colgate Palmolive
Financials
Income Statement (Rs m) Balance Sheet Abstract (Rs m) Y/e Mar FY18 FY19 FY20E FY21E Y/e Mar FY18 FY19 FY20E FY21E Net Revenues 41,880 44,624 47,712 52,036 Non-Current Assets YoY gr. (%) 5.2 6.6 6.9 9.1 Cost of Goods Sold 14,901 15,586 16,466 17,919 Gross Block 19,983 22,069 24,169 26,269 Gross Profit 26,979 29,039 31,247 34,117 Tangibles 19,077 21,162 23,262 25,362 Margin (%) 64.4 65.1 65.5 65.6 Intangibles 907 907 907 907 Employee Cost 3,059 2,959 3,318 3,723 Other Expenses 3,395 3,852 3,905 4,269 Acc: Dep / Amortization 8,524 10,116 12,186 14,114 Tangibles 7,617 9,209 11,280 13,207 EBITDA 11,124 12,361 13,931 15,113 Intangibles 907 907 907 907 YoY gr. (%) 17.9 11.1 12.7 8.5 Margin (%) 26.6 27.7 29.2 29.0 Net fixed assets 11,459 11,953 11,983 12,155 Tangibles 11,459 11,953 11,983 12,155 Depreciation and Amortization 1,565 1,592 2,070 1,928 Intangibles - - - -
EBIT 9,559 10,769 11,861 13,185 Capital Work In Progress 1,586 1,500 1,500 1,500 Margin (%) 22.8 24.1 24.9 25.3 Goodwill - - - - Non-Current Investments 573 581 591 602 Net Interest - 25 110 116 Net Deferred tax assets (355) (474) (602) (743) Other Income 388 377 424 464 Other Non-Current Assets 1,414 1,567 1,710 1,877
Profit Before Tax 9,947 11,121 12,175 13,534 Current Assets Margin (%) 23.8 24.9 25.5 26.0 Investments 2,817 1,207 3,014 1,025 Inventories 2,267 2,826 2,852 3,044 Total Tax 3,352 3,956 4,261 4,710 Trade receivables 2,010 2,186 2,078 2,125 Effective tax rate (%) 33.7 35.6 35.0 34.8 Cash & Bank Balance 1,745 2,365 2,223 2,915 Other Current Assets 795 886 948 1,034 Profit after tax 6,595 7,164 7,914 8,824 Total Assets 25,639 26,048 27,884 27,269 Minority interest - - - - Share Profit from Associate - - - - Equity Equity Share Capital 272 272 272 272 Adjusted PAT 6,595 7,164 7,914 8,824 Other Equity 14,974 14,228 15,603 13,627 YoY gr. (%) 14.2 8.6 10.5 11.5 Total Networth 15,246 14,500 15,875 13,898 Margin (%) 15.7 16.1 16.6 17.0 Extra Ord. Income / (Exp) 139 591 - - Non-Current Liabilities Long Term borrowings - - - - Reported PAT 6,734 7,756 7,914 8,824 Provisions 191 237 265 298 YoY gr. (%) 16.6 15.2 2.0 11.5 Other non current liabilities 5 5 5 5 Margin (%) 16.1 17.4 16.6 17.0 Current Liabilities Other Comprehensive Income - - - - ST Debt / Current of LT Debt - - - - Total Comprehensive Income 6,734 7,756 7,914 8,824 Trade payables 6,145 6,436 6,753 7,083 Equity Shares O/s (m) 272 272 272 272 Other current liabilities 3,683 4,382 4,370 5,227 EPS (Rs) 24.2 26.3 29.1 32.4 Total Equity & Liabilities 25,639 26,048 27,884 27,269 Source: Company Data, PL Research Source: Company Data, PL Research
September 3, 2019 9 Colgate Palmolive
Cash Flow (Rs m) Key Financial Metrics
Y/e Mar FY18 FY19 FY20E FY21E YearY/e Mar FY18 FY19 FY20E FY21E
PBT 9,947 11,121 12,175 13,534 Per Share(Rs) Add. Depreciation 1,565 1,592 2,070 1,928 EPS 24.2 26.3 29.1 32.4 Add. Interest - 25 110 116 CEPS 30.0 32.2 36.7 39.5 Less Financial Other Income 388 377 424 464 BVPS 56.1 53.3 58.4 51.1 Add. Other 166 608 18 19 FCF 18.3 33.7 24.0 42.7 Op. profit before WC changes 11,678 13,346 14,373 15,596 DPS 13.0 15.0 20.0 25.0 Net Changes-WC (1,499) 1,774 (1,487) 2,841 Return Ratio(%) Direct tax (3,352) (3,956) (4,261) (4,710) RoCE 68.3 72.4 78.1 88.6 Net cash from Op. activities 6,827 11,164 8,625 13,727 ROIC 67.2 61.4 77.5 78.5 Capital expenditures (1,863) (2,000) (2,100) (2,100) RoE 47.1 48.2 52.1 59.3 Interest / Dividend Income - - - - Balance Sheet Others 0 0 - - Net Debt : Equity (x) (0.3) (0.2) (0.3) (0.3) Net Cash from Invt. activities (1,863) (2,000) (2,100) (2,100) Net Working Capital (Days) (16) (12) (14) (13) Issue of share cap. / premium 3 1 1 1 Valuation(x) Debt changes - - - - PER 52.6 48.4 43.8 39.3 Dividend paid (4,256) (8,519) (6,558) (10,820) P/B 22.7 23.9 21.8 24.9 Interest paid - (25) (110) (116) P/CEPS 42.5 39.6 34.7 32.2 Others - - - - EV/EBITDA 30.8 27.8 24.5 22.7 Net cash from Fin. activities (4,253) (8,543) (6,667) (10,935) EV/Sales 8.2 7.7 7.2 6.6 Net change in cash 712 620 (142) 692 Dividend Yield (%) 1.0 1.2 1.6 2.0 Free Cash Flow 4,964 9,164 6,525 11,627 Source: Company Data, PL Research Source: Company Data, PL Research
Quarterly Financials (Rs m) Y/e Mar Q2FY19 Q3FY19 Q4FY19 Q1FY20 Net Revenue 11,680 10,994 11,538 10,849 YoY gr. (%) 7.7 6.4 5.7 4.2 Raw Material Expenses 4,115 3,833 4,088 3,704 Gross Profit 7,565 7,161 7,449 7,145 Margin (%) 64.8 65.1 64.6 65.9 EBITDA 3,296 3,145 3,104 2,998 YoY gr. (%) 9.6 11.3 0.9 6.5 Margin (%) 28.2 28.6 26.9 27.6 Depreciation / Depletion 398 406 394 499 EBIT 2,897 2,739 2,711 2,500 Margin (%) 24.8 24.9 23.5 23.0 Net Interest - - 25 23 Other Income 86 79 120 152 Profit before Tax 2,984 2,818 2,805 2,628 Margin (%) 25.5 25.6 24.3 24.2 Total Tax 1,020 986 990 937 Effective tax rate (%) 34.2 35.0 35.3 35.7 Profit after Tax 1,964 1,831 1,815 1,691 Minority interest - - - - Share Profit from Associates - - - - Adjusted PAT 1,964 1,831 1,815 1,691 YoY gr. (%) 10.6 7.3 (0.6) 8.8 Margin (%) 16.8 16.7 15.7 15.6 Extra Ord. Income / (Exp) - 90 161 - Reported PAT 1,964 1,921 1,976 1,691 YoY gr. (%) 10.6 12.6 4.7 (10.8) Margin (%) 16.8 17.5 17.1 15.6 Other Comprehensive Income - - - - Total Comprehensive Income 1,964 1,921 1,976 1,691 Avg. Shares O/s (m) 272 272 272 272 EPS (Rs) 7.2 6.7 6.7 6.2 Source: Company Data, PL Research
September 3, 2019 10 Colgate Palmolive
Price Chart Recommendation History
(Rs) No. Date Rating TP (Rs.) Share Price (Rs.) 1350 1 18-Jul-19 Hold 1,208 1,204
1232 2 04-Jul-19 Hold 1,220 1,152 3 27-May-19 Hold 1,220 1,180 1114 4 05-Apr-19 Hold 1,258 1,227
997 5 24-Jan-19 Hold 1,245 1,322 6 07-Jan-19 Hold 1,157 1,303 879
7 29-Oct-18 Hold 1,157 1,102
Mar-17
Feb-18
Feb-19
Sep -16 Sep
Aug -17 Aug Aug -18 Aug Aug -19 Aug 8 05-Oct-18 Reduce 1,084 1,069
Analyst Coverage Universe Sr. No. Company Name Rating TP (Rs) Share Price (Rs) 1 Asian Paints Accumulate 1,522 1,479 2 Avenue Supermarts Hold 1,338 1,359 3 Britannia Industries Accumulate 3,068 2,602 4 Colgate Palmolive Hold 1,208 1,204 5 Crompton Greaves Consumer Electricals BUY 297 225 6 Dabur India Hold 437 429 7 Emami Accumulate 386 310 8 Future Retail BUY 512 395 9 GlaxoSmithKline Consumer Healthcare Hold 7,972 7,473 10 Hindustan Unilever Accumulate 1,816 1,690 11 ITC BUY 367 265 12 Jubilant FoodWorks BUY 1,459 1,153 13 Kansai Nerolac Paints Accumulate 479 434 14 Marico Hold 357 363 15 Nestle India Hold 10,900 12,004 16 Pidilite Industries Accumulate 1,301 1,290 17 Titan Company BUY 1,173 1,047 18 Voltas Hold 609 601
PL’s Recommendation Nomenclature (Absolute Performance) Buy : > 15% Accumulate : 5% to 15% Hold : +5% to -5% Reduce : -5% to -15% Sell : < -15% Not Rated (NR) : No specific call on the stock Under Review (UR) : Rating likely to change shortly
September 3, 2019 11 Colgate Palmolive
ANALYST CERTIFICATION (Indian Clients)
We/I, Mr. Amnish Aggarwal- MBA, CFA, Ms. Nishita Doshi- CA, B.Com Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. (US Clients)
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