Hold Colgate Palmolive (India); target of Rs 2124: KR Choksey

KR Choksey's research report on Colgate Palmolive (India)

For Q2FY24, CLGT reported revenue of INR 14,711 Mn, a growth of 6.0% YoY/ 11.1% QoQ. Domestic growth was at 6.6% YoY with the toothpaste segment witnessing higher single-digit growth. Revenue for H1FY24 rose 8.1% YoY to INR 27,948 Mn. EBITDA for the quarter expanded by 18.2% YoY/ 15.3% QoQ to INR 4,821 Mn. EBITDA margin expanded by 337 bps YoY/ 119 bps QoQ to 32.8%, driven by pricing and efficiencies. For H1FY24, EBITDA grew by 22.7% YoY to INR 9,003 Mn while EBITDA margin expanded by 382 bps YoY to 32.2%. PAT for the quarter went up by 22.3% YoY/ 24.3% QoQ to INR 3,401 Mn. PAT margin expanded by 308 bps YoY/ 244 bps QoQ. PAT for H1FY24 expanded by 25.8% YoY to INR 6,137 Mn while PAT margin expanded by 309 bps YoY. Adj. PAT for the quarter grew by 22.3% YoY/ 16.0% QoQ while for H1FY24 it grew by 27.4% YoY. The Board declared a First Interim Dividend of INR 22/- per equity share of face value of INR 1/- each for FY24E.

Outlook

We revise our FY24E/FY25E EPS by +2.2%/ +4.4%, respectively to factor in margin stabilization around H1FY24 levels going ahead. We estimate CLGT’s Revenue/ EBITDA/ Adj. PAT to grow at a CAGR of 7.6%/ 11.9%/ 14.0% over FY23-FY25E. CLGT’s share price is currently trading at 44.5x/ 41.1x it’s FY24E/ FY25E Adj. EPS. We assign a P/E multiple of 42x (unchanged) on FY25E EPS of INR 50.4 and arrive at a target price of INR 2,124 per share (INR 2,034 earlier), implying an upside potential of 2.1% from CMP. We maintain our “Hold” rating on the shares of Colgate Palmolive India.