Hold Colgate-Palmolive India; target of Rs 900: Axis Direct

Axis Direct's research report on Colgate-Palmolive India

Net sales grew only 3% YoY as volumes declined ~3% due to sustained pressure in wholesale. Toothpaste market share declined 120 bps YoY to 54.1% but toothbrush market share grew 160 bps YoY to 47.4%. Higher A&P (+242 bps YoY to14%) offset benefits from lower RM cost (down 153 bps YoY at 37.5%) and other opex (down 89 bps YoY), resulting in OPM decline of 29 bps YoY to 23.7%.

Outlook

Despite EPS CAGR of 4% over FY12-17 and market share loss of 400bps in the past two years, valuations remain elevated at forward P/E of 41x. Maintain HOLD with a revised TP of Rs 900 (Rs 840 earlier) based on forward P/E of 32x.