MOSL:COLGATE: Broadly in line; sales revival remains elusive
- CLGT's 1QFY23 sales and gross profit were in line. Higher than forecasted other expenses led to an EBITDA miss.
- The management said 1QFY23 was impacted by a slowdown in rural India and inflationary pressures. It remains cautiously optimistic of improving trends in coming quarters.
- While we await the response of re-launches/launches and the strategy under the new CEO, the core issue of lack of sales growth (caused by high category penetration, especially when allied with the fact that CLGT has not shown any signs of regaining lost market share), will continue to delay re-rating of the stock, given the little signs of a shift from its dependence on Oral Care. We maintain our Neutral rating.
Sales and gross margin in line; higher other expense led to an EBITDA miss
- CLGT reported a net sales growth of 2.6% YoY to INR12b (est. INR12.1b).
- Domestic volume is likely to decline by 1% YoY in 1QFY23.
- EBITDA declined by 8.3% YoY to INR3.3b (est. INR3.7b).
- PBT declined by 7.1% YoY to INR2.9b (est. INR3.3b).
- Adjusted PAT declined by 6.1% YoY to INR2.2b (est. INR2.4b).
- Gross margin contracted by 280bp YoY to 66.3% (est. 66.2%).
- As a percentage of sales, lower staff costs at 7.8% (down 30bp YoY), flat ad-spends at 13.6% (v/s 13.7% YoY), and higher other expenses at 17.7% (up 90bp), led to a 330bp contraction in EBITDA margin to 27.2% (est. 30.5%).
- Absolute ad spends grew 1.8% YoY and 11% QoQ to INR1.6b.
- Exceptional Item: It pertains to severance and related expenses of INR93.4m with respect to certain changes in its organizational structure.
Key highlights from the press release
- The management said 1QFY23 was impacted by a slowdown in rural India and inflationary pressures.
- The management is cautiously optimistic that the current trends will improve in coming quarters.
- It has received an encouraging response to its recently launched Face Care range, and advance electronic Toothbrushes and Water Flossers.
- Visible Whit O2, which has a patented, innovative technology, has been appreciated by consumers.
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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