The Hindu Business Line : Oral care segment keeps Colgate strong

THE stock of Colgate Palmolive India has been witnessing renewed interest on the bourses in the recent past. The stock, which has been dogged by rumours of buyback, has appreciated by almost 7 per cent from Rs 141.40 on the BSE (on Sept 1) to current levels of Rs 151.

While there is a perception that it is more of a fundamental play, brokers maintain that select counters in the FMCG segment have been looking attractive at these levels.

According to analysts, the month-on-month sales figures in the oral care segment of Colgate have been looking up, which in turn is propelling interest in the counter. Additionally, a couple of FII broking houses has reportedly come out with a positive recommendation on the company.

A price cut in their products Colgate Dental Cream and Colgate Cibaca, is said to have aided the company in regaining some amount of market share from say Anchor etc. The oral care market in India is pegged at around Rs 2,000-Rs 2,100 crore.

According to analyst, Mr Harrish Zaveri of Edelweiss Capital, the company has around 45-50 per cent market share in the oral care market. "The company had reported a 7-per cent volume growth in its last quarter, driven primarily by Colgate Dental and Colgate Cibaca. There is no reason to believe that they will not be able to sustain the volume growth. Going forward, they are looking at an earnings growth of anywhere, between 13.3 per cent and 20 per cent," he added.

However, there are concerns that the entry of Procter & Gamble in the oral care segment may negatively impact Colgate Palmolive's sustained volume growth. Yet, analysts believe that the company is looking at an excise relief, on its Rs 50-crore capital expenditure in Himachal Pradesh.

"The company is preparing for the said competition. If one were to factor in the excise benefit, they will be in a position to offer their flagship brand at very competitive rates," said an analyst tracking the system.

The stock ended the day at Rs 151.65, up 4.41 per cent, with around 2.42 lakh shares traded on the BSE. On the NSE, it closed at Rs 151.55, up 4.27 per cent, with around 3.75 lakh shares traded. On the NSE, the stock closed at Rs 151.55, up 4.27 per cent, with 3.75 lakh shares traded. Of the traded shares, 48.9 per cent was up for delivery on the BSE and 55.40 per cent shares on the NSE.