Comments
Target: ₹1,756
CMP: ₹2,079.85
Colgate Palmolive’s Q2FY24 print was in line; revenue/EBITDA/PAT grew 6.1/18.7/22.3 per cent. Domestic sales grew 6.6 per cent led by flat volumes. Management said, toothpaste category volumes remained flattish in rural markets, although improved sequentially.
We note Colgate’s growth was driven by its focused strategy of growing oral care category driven by newly launched formulation for its flagship product CDC (with Arginine technology). Recently Colgate launched new ad-campaign to drive twice a day brushing habits. Management said, there are signs of recovery in rural markets, the toothbrush category saw persistent pressure on volumes due to rising competition from Oral-B.
Further, its exports sales declined steadily in Q2. Gross margin improved by 510bp at 68.6 per cent y-o-y, though EBITDA grew by 18.7 per cent to ₹470 crore supported by lower other expenses (-2.9 per cent) despite higher A&P/employee cost grew by 30.2/12.4; EBITDA margin settled at 32.4 per cent (+343bp).
As we had argued in the past the ad-spends now risen to 14.5 per cent of sales. With mid-single digit volume growth in FY24 we tweaked earning and introduced FY26 earnings and retain Sell, with a revised DCF-based TP of ₹1,756 (implied 36.9x avg. of FY25/26E EPS).
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.