PINC Research has maintained hold rating on Colgate Palmolive (India) with a target price of Rs 857 in its May 31, 2011 research report.
"Colgate Palmolive (India)'s Q4FY11 numbers were above our estimates owing to lower A&P spending. Q3FY11 A&P expenditure was high and the Colgate management had denied earlier for the consequence benefits in Q4FY11. However, the management recognized this benefit at the Analyst Meet. A&P (% of net sales) reduced 220bps YoY and 750bps QoQ. Net sales growth of 13% was underpinned by ~12% volume growth. EBITDA margin declined by 288bps compared to our expectation of 600bps decline. Lower depreciation and taxes helped adjusted net profit (excluding Rs 100 million prior period taxes in Q4FY10) to grow 9% to Rs1,141 million (PINCe Rs 906 million)."
"We believe volume growth will sustain owing to Colgate's rural focus, regular product launches, and continued dental awareness programmes. Our target multiple at 24x on 12-month forward earnings is slightly lower than that of the FMCG sector. We maintain our 'HOLD' recommendation while raising target price to Rs 857 (earlier Rs822)," says PINC Research report.
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