MOSL: COLGATE (Neutral)-Continued weak sales growth; weak outlook ahead
COLGATE: Continued weak sales growth; weak outlook ahead
(CLGT IN, Mkt Cap USD6.3b, CMP INR1709, TP INR1770, 4% Upside, Neutral)
- Colgate-Palmolive (CLGT)’s weak sales growth trend has persisted in recent quarters. In 1QFY22 as well, the two-year average sales growth was at the lower end of the 4–6% range seen in recent quarters. It has now been six years since the company reported over 7% sales growth in any year. With (a) the launch of the Non-Oral Care portfolio and (b) investments under the ‘Brush Twice a Day’ campaign seemingly on the backburner, it is unlikely to return to the double-digit sales growth seen over FY08–15 anytime soon.
- There is no evidence that the company is re-gaining lost market share in the core Oral Care business. While ad spend increased 40.6% YoY on a low base, at 13.7% of sales, this was still the second highest in the past five quarters – perhaps, this indicates some efforts to boost share, the only silver lining for the company amid a disappointing 1QFY22 result.
- We had downgraded the stock to Neutral post the 4QFY21 results, and while valuations may appear inexpensive v/s Staples and Discretionary peers, mid-single-digit PBT and PAT CAGRs do not warrant a change in view. Maintain Neutral.
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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