Hold Colgate Palmolive; target of Rs 1563: R K Global

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26 Aug, 2025 12:21

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R K Global has recommended hold rating on Colgate Palmolive (India) with a target of Rs 1563, in its November 29, 2012 research report.
 
“Colgate Palmolive reported “below expectations” in net sales growth of ~17% YoY to Rs7,924 mn (~6% lower to our estimates) for Q2FY’13. During the quarter the company achieved a volume growth of ~10%. Colgate Palmolive India's market share in the toothpaste markets stood at 54.5%, its highest since 1998, a rare instance of a market leader gaining new ground. Aggressive marketing and a huge 32 jump in advertising spend in the first quarter of FY’13 over a year ago coupled with a launch of new variants across consumer segments has helped the largely single product company drive growth.”
 
“EBITDA grew by ~34% YoY to Rs1,758 mn for Q2FY13. Increase in raw material cost (up 183 bps YoY) and higher other expenditure (up 315 bps YoY) was more than offset by lower advertising and Sales promotion spends (down 570bps YoY) and employee costs (down 211 bps YoY). Consequently margins improved by 282 bps YoY to ~22.2% for the quarter. Net profit grew by ~46%YoY & 24% QoQ to Rs1,451 mn on the back of higher other income and lower effective tax rate (~19% in Q2FY’13 v/s ~23% in Q2FY’12). Colgate has backed its extended product range with robust distribution clout. The essentially single-brand company has one of the widest networks, touching 4.5 mn retail outlets in India. Colgate's sustained distribution strength, coupled with product innovation and creation of sub-categories such as mouthwash and sensitive oral care have helped it drive growth aggressively.”
 
“We are extremely confidant of irrepressible product price led growth on account of consistent innovation and utter domination in oral care segments, both in the urban & rural markets. Also, the company continues to gain market (at ~54.5%, the highest since 1998) share in tough environment. 1) Majority of revenue comes from single category; 2) Pricing power amongst similar products; 3) Market leadership. We review our earlier set TP of Rs1,289 to Rs1,563, however, re-affirming in our earlier rating of HOLD till TP. The stock presently trades at a P/E and P/BV of ~47.5x and ~16.9x respectively of FY’13E EPS and BVPS. The stock offers a potential return of ~10.0% from CMP on a 12M period. Our TP is reached at a P/E of ~52.1x and P/BV of ~18.6x, using FY’13E EPS of Rs30 and BVPS of Rs84,” says R K Global research report.

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