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Religare Research
Colgate-Palmolive (Sell)
CMP: Rs 1,278.10
Target: Rs 1,170
Colgate-Palmolive’s Q2FY13 net sales/EBITDA/adjusted PAT grew 17.7 per cent/40.2 per cent/ 36.8 per cent y-o-y, in line at the sales level but better at the profitability front due to lower personnel and other expenses. Volumes grew 10 per cent (versus 11 per cent in Q1FY13), with toothpaste volumes rising by 11 per cent. EBITDA margin improved 325 bps y-o-y. The mouthwash category saw continued growth momentum with improvement in market share from 26.4 per cent to 26.8 per cent over the same period. We roll forward our valuations to September 2014 earnings to arrive at a revised September 2013 target price of Rs 1,120. Key risks to our call are: a) stronger-than-expected volume growth; b) a steep fall in input costs; and c) higher margin expansion led by lower A&P (advertising and promotion) and other expenses.
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