Motilal Oswal neutral on Colgate Palmolive; target Rs 1400

Motilal Oswal's report on Colgate Palmolive (India)

• P&G has entered toothpastes, with the launch of three variants under the Oral B brand.
• We do not expect this to create material disruption for CLGT, given its wide product portfolio, well entrenched brand equity and deeply penetrated distribution network.
• While we envisage continuation of media aggression from P&G, we believe it is unlikely to precipitate a price war in the category.
• We do not foresee material erosion in CLGT's market share. The entry of an MNC with deep pockets may expand the category, and being the market leader, CLGT could also benefit.

Valuation and view: "We are not too concerned about the impact of P&G's entry into Oral Care on CLGT. However, post the strong outperformance of the last three years, current valuations factor in all the positives – strong balance sheet, 100 percent+ RoCE, ~80 percent payout, and market leading position in a growing category. We maintain our Neutral rating on CLGT, as we believe current valuations at 31.4x FY14E and 26.7x FY15E EPS are expensive, given the context of moderation in consumer spending (though CLGT has so far remained immune from any slowdown in its core toothpaste volume growth), and leave little room for disappointments," says Motilal Oswal research eport. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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