Comments
JM Financial Services
Colgate-Palmolive (Hold)
CMP: ₹1,313.7
Target: ₹1,405
Colgate’s 4QFY20 remained a lacklustre quarter — with impact of the lockdown being more accentuated than we anticipated, given that the company doesn’t really have any season-dependent summer products that would have indexed the quarter’s revenue towards end-March when the country got locked down. In that context, 8 per cent volume decline was sharper than warranted implying that activity-levels during the last few days of the quarter were sub-10 per cent at best.
Colgate’s relatively higher wholesale dependence likely worked against the company again during the current disruption phase, as it did post the currency-replacement programme in November 2016. Margin management fell short as well, with gross margin down 100 bps vs Dec-Q (flat y-o-y) despite a more benign costs environment; EBITDA margin was expectedly impacted by scale deleverage, given the lower turnover during the quarter.
Persistently weak performance coupled with absence of any near-term catalyst and rich valuation (42x NTM EPS) would constrict stock performance in the days ahead, in our view. Rating remains at ‘hold’.
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.