Accumulate Colgate; target of Rs 1384: KRChoksey

KRChoksey is bullish on Colgate Palmolive (CPIL) and has recommended accumulate rating on the stock with a target of Rs 1384 in its October 31, 2012 research report.

“Colgate reported healthy net sales growth of 17%YoY to Rs 792 crores (marginally above estimates) for Q2FY13. During the quarter the company achieved a volume growth of 10%. EBITDA grew by 34%YoY to Rs 176 crores for Q2FY13. Increase in raw material cost (up 183bps YoY) and higher other expenditure (up 315bps YoY) was more than offset by lower advertising and Sales promotion spends (down 570bps YoY) and employee costs (down 211bps YoY). Consequently margins improved by 282bps YoY to 22.2% for the quarter. Net profit grew by 46%YoY & 24%QoQ to Rs 145 crores on the back of higher other income and lower effective tax rate (19% in Q2FY13 v/s 23% in Q2FY12).”

“CPIL registered net sales growth of 17%YoY to Rs 792 crores for Q2FY13. During the quarter, the company achieved volume growth of 10%. The company enhanced its leadership position in the toothpaste category to 54.3% volume market share (Jan’12 to Sep’12) from 52.3% (Jan’11 to Sep’11). The flagship brands “Colgate Dental Cream”, “Active Salt”, “MaxFresh”, “Colgate Sensitive” and “Colgate Total” contributed to its consistent growth. The company showed strong growth in toothbrush category with market share of 39.0% (Jan’12 to Sep’12). The mouthwash category continues its growth momentum with market share at 26.8% (Jan’12 to Sep’12).”

“CPIL has been able to withstand increased competitive intensity ((HUL, Dabur & P&G) with higher launches and at the same time reducing costs through improved efficiencies leading to sustaining margins and funding investments. We upgrade the stock to accumulate with a target price of Rs 1384,” says KRChoksey research report.

Public holding more than 90% in Indian cos

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