Colgate-Palmolive's Q4FY19 results (Neutral) - Subdued quarter; earnings outlook weaker than peers…
Q4FY19 result highlights
- Net sales increased by 5.7% yoy to Rs11.5bn (est: Rs11.7bn) while EBITDA (incl. op income) increased by 1% yoy to Rs3.1bn (est: Rs3.4bn), Adjusted PAT increased by 1% yoy to Rs1.8bn (est: Rs1.98bn). Reported PAT was up 5% yoy to Rs1.97bn.
- Domestic volumes increased by 5% yoy (est: 7%). Overall volumes increased by 3% yoy
- Gross margins were down 120bps yoy basis (down 60bps qoq) at 64.3% impacted by higher input costs and higher promotions.
- Staff cost declined by 3% yoy, other expenses increased by 8% yoy and advertising expense were up 9% yoy basis (up 40bps yoy as a % to sales to 13.6%). Other op income was up 8% yoy. Resultant EBITDA margins decreased by 130bps yoy to 26.9%.
- Depreciation decreased by 3% yoy, other income was up 44% yoy. Adjusting for tax reversal (Rs177.9m in 4QFY18 & Rs196.6m in 4QFY19) and one-time severance expense of Rs36m, PAT grew by 1% yoy.
Key negatives: Lower volumes growth, contraction in margins.
Impact on financials: We cut our FY20/21E earnings by 6%/7%.
Valuations & view
Colgate ended FY19 on a weak note with volume and margin below estimates. Further, the revenue growth for 4QFY19 & FY19 was lower compared to Dabur (Toothpaste revenue growth of 9.3% & 10.7% for 4Q & FY19 respectively) indicative of continued pressure on market share. While management indicated that it has been able to stabilise market share, we believe, driving share gains will be challenging considering strong competitive activity in the segment. Further, moderation in category growth & weakness in rural markets, uptick in revenue growth is likely to be more gradual. Also, margin expansion is unlikely from current peak levels due to higher input costs and focus on driving market share & revenue growth which will entail higher investment behind brands. Valuations at 41x/37x FY20/21E remain prohibitive considering relatively lower revenue and earnings trajectory compared to staples peers. Maintain Neutral rating on the stock.​
Colgate Palmolive (India) Limited is engaged in the personal care and oral care business. The Company offers various personal care products, such as soaps, cosmetics and toilet preparations. The Company's oral care category of products includes toothpastes, toothbrushes, toothpowder, whitening products and mouthwash. In the toothpaste category, the Company offers products, including Colgate Total Charcoal Deep Clean Toothpaste, Colgate Active Salt Neem Toothpaste and Colgate Sensitive Pro-Relief (CSPR) Enamel Repair Toothpaste. In the toothbrush category, the Company offers the Colgate 360 degree Toothbrush range, including 360 degree Charcoal Gold, 360 degree Whole Mouth Clean, 360 degree Visible White and 360 degree Floss-Tip, and Colgate ZigZag Black Toothbrush. In the Personal Care category, the Company offers Palmolive's Foaming Hand Wash range in approximately two variants.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.