Buy Colgate Palmolive; target of Rs 1400: Emkay
Emkay Global Financial Services is bullish on Colgate Palmolive (India) and has recommended buy rating on the stock with a target price of Rs 1400 in its October 29, 2012 research report.
October 31, 2012 / 12:41 IST
Emkay Global Financial Services is bullish on Colgate Palmolive (India) and has recommended buy rating on the stock with a target price of Rs 1400 in its October 29, 2012 research report.
“Colgate Palmolive (India), strong performance aided by vol. growth and premiumisation; revenue grows 17.7% yoy to Rs 7.7 bn and APAT grows 34% yoy to Rs1.5 bn (led by lower tax and cost rationalization). Volume growth resilient at 10% yoy with continues market share gain. Jan’12-Sep’12 market share in toothpaste category is 200 bps higher yoy. Ebitda surged 30.2% to ~INR 1.6bn (9% higher than our estimate) primarily led by lower employee cost (@7%; lowest since past 20 quarters) and ad spends (down 590bps). We are enthused by its constant market share gain and resilient price led growth despite tough scenario.Key highlights of the performance are (1) revenue growth of 17.7% yoy to Rs7.7 bn (2) Ebidta growth of 30.2% yoy to Rs1.6 bn (3) Ebidta margin expands 194bps yoy to 20.3% and (4) APAT growth of 34% yoy to Rs1.5 bn. (5) The company has gained 200bps market share in toothpaste category during Jan’12-Sep’12. Also, Toothbrush category and mouthwash category have reported robust market share of 39% and 26.8% respectively, during Jan’12-Sep’12.The EBITDA margins expanded 194bps led by lower ad spends (down 590bps) and employee cost (down 94bps; lowest since past 20 quarters). This was offset to certain extent by increase in other expenditure (up 317bps). Also, APAT surged 34% yoy on account of 19% tax rate (Q1FY13 : 28%; Q2FY12: 21%)We are buoyed by resilient price led growth on account of persistent innovation and dominating presence in oral care segment. Also, the company continues to gain market share in tough environment. We compare the stock to Glaxosmithkline Consumer (which trades at 30x 2-year fwd earning) due to 1) majority of revenue comes from single category; 2) pricing power; 3) market leadership. Upgrade the stock to BUY with price target price of Rs. 1400/share (30x FY14E earnings)," says Emkay Global Financial Services research report.What stocks does Morgan Stanley hold? 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.To read the full report click on the attachment 
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