Hold Colgate-Palmolive India; target of Rs 1350: ICICI Direct

ICICI Direct's research report on Colgate-Palmolive India

On an unfavourable base of 12% volume growth, CPIL was able to post 7% volume growth in Q3FY19. EBITDA margins improved 123 bps to 28.6% on account of 79 bps decline in employee costs to sales, 22 bps decline in advertisement spend to sales & 30 bps fall in miscellaneous expenses to sales. PAT witnessed growth of 12.6% YoY to Rs 192.1 crore in line with growth in operating profit.

Outlook

The company has also tied up with e- Choupal 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 in valuation (~40x P/E at FY21 EPS) for a single product category company, which is already penetrated by more than 75%. We reiterate our HOLD rating with a revised target price of Rs 1400/share.