MOSL: COLGATE (Buy)-Performance exceeds expectations-rural revival to be the next trigger
Colgate: Performance exceeds expectations; rural revival to be the next trigger
(CLGT IN, Mkt Cap USD4.8b, CMP INR1121, TP INR1365, 22% Upside, Buy)
- CLGT’s volumes grew 12% YoY (est. of +10%) in 3QFY18. Net sales grew 18.2% YoY to INR10.8b (est. of INR9.8b), while EBITDA was up 31.9% YoY (est. of +18.5%) to INR2.8b. Adj. PAT grew 33.5% YoY (est. of +17.2%) to INR1.7b. Market share shrunk in toothpaste category by 170bp YoY (-30bp QoQ) to 53.7% and in toothbrush category by 190bp YoY (-40bp QoQ) to 45.1%.
- Gross margin continued to expand (+130bp YoY to 65.2% v/s est. of 64.2%). High ad spends (+210bp YoY to 11.7%) were entirely offset by a sharp decrease in other expenses (-340bp YoY to 18.9%) and lower staff cost (-20bp YoY to 7.3%). Thus, the EBITDA margin expanded 290bp YoY to 27.3% (est. of 25.8%).
- Nine-month performance: Sales, EBITDA and adj. PAT grew 5.3%, 14.9% and 11.4%, respectively. Gross and EBITDA margin expanded 100bp YoY (to 64%) and 220bp YoY (to 26%), respectively.
- Management commentary highlights: 1) Operating environment has been stabilizing post GST implementation. 2) Naturals portfolio, with the addition of Colgate Swarna Vedshakti, has seen good consumer response.
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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