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HDFC Research
Colgate-Palmolive (Buy)
CMP: ₹2,002.65
Target: ₹2,192
We expect CPIL’s net sales growth to improve over FY15-17 led by gradual uptick in the volume growth in both toothpaste and toothbrush, which would be driven by improved demand environment and continued distribution expansion. Despite tough competitive environment (toothpaste category witnessing volume decline), positive volume growth and market share gains is encouraging and reflects CIPL’s dominant position in the oral care category. Rural demand has been better than urban demand recently and decline in industry volumes is reducing, which indicates recovery in the coming quarters. While the volume growth could be in high single digits over the next two years (could improve to 6 per cent in FY16 and to 8 per cent in FY17), we expect the overall value growth to be supported by improved product mix (with innovative premium product offerings). Strong brand equity and innovation pipeline, focus on premiumisation, wide distribution network provides strong growth visibility, market share gains and competitive advantage. Buy at CMP and add on dips to ₹1,678-1,748.
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