MOSL: COLGATE (Buy)-Volumes miss again, market share loss continues; valuations comforting
Colgate: Volumes miss again, market share loss continues; valuations comforting
(CLGT IN, Mkt Cap USD4.3b, CMP INR1084, TP INR1360, 25% Upside, Buy)
- CLGT posted disappointing volume growth of 4% YoY (est. of +11%), despite a low base (volumes were down 5% in 1QFY18). Net sales grew 6.5% YoY to INR10.4b (est. of INR11.1b) in 1QFY19. EBITDA was up 26.7% YoY to INR2.8b (est. of INR3b). Adj. PAT grew 22.4% YoY to INR1.7b (est. of INR1.8b). Reported PAT grew 38.9% on account of extraordinary income (pre-tax profit of INR341m on former factory land sale at Aurangabad).
- Market share contraction continued for CLGT. Its market share in toothpaste declined sharply by 100bp QoQ and 190bp YoY to 52.7% over January-June 2018. Toothbrush market share stood at 44.6% (-20bp QoQ and -40bp YoY).
- Gross margin maintained its uptrend (up 250bp YoY to 65.9% v/s est. of 64.9%). A reduction in ad spends (-90bp YoY off a higher base to 13.8% of sales), other expenses (-70bp YoY to 17.9%) and staff cost (-20bp YoY to 7.2%) led to EBITDA margin expansion of 430bp YoY to 27.0% (est. of 26.7%).
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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