Hold Colgate-Palmolive (India); target of Rs 1250: ICICI Direct

ICICI Direct's research report on Colgate-Palmolive (India)

The company reported 5.7% YoY growth in revenue to Rs 1,153.8 crore mainly driven by 5% volume growth. Operating profit increased marginally by 0.9% to Rs 310.4 crore while operating margins contracted 128 bps to 26.9% mainly due to 110 bps decline in gross margins on account of higher promotional spend across platforms. PAT increased 4.7% YoY to Rs 197.6 crore led by higher other income. The company declared a special interim dividend of Rs 8 per share.

Outlook

CPIL has one of the widest distribution networks in India, which spans across ~6 million outlets across the country. Going forward, the increasing distribution network would help enhance the volume growth of the company. For increasing its presence in rural areas, CPIL has undertaken initiatives like Project Jagruti and Disha for the same. Though the company has been able to stabilise its decline in market share from Q2FY19, we believe there is limited upside (~37x P/E at FY21 EPS) for a single product category company, which is already penetrated by about 88%. We reiterate our HOLD rating on CPIL with a revised target price of Rs 1250/share.