Buy Colgate; target of Rs 1180: Motilal Oswal

Motilal Oswal's research report on Colgate

Sales were up 3% YoY to INR 39.5b. EBITDA grew 0.7% YoY to INR 9.4b, as gross margin expansion of 110bp was offset by 130bp higher ad spend to sales to 12.9%. PAT declined 5.7% YoY to INR 5.8b. Net fixed assets (incl. CWIP) increased INR 1.9b YoY. Negative net working capital rose 12.5% YoY as increase in creditor days offset higher receivables.

Outlook

Long-term earnings potential is strong, and balance sheet is best-of-breed. There is no material change to our EPS forecasts. Maintain Buy with revised TP of INR 1,180 (INR 1,200 earlier) based on 38x Mar-18 EPS, 5% discount to average multiple for past three years.