Hold Colgate Palmolive; target of Rs 1208: Prabhudas Lilladher

Prabhudas Lilladher's research report on Colgate Palmolive

We cut our EPS estimates for FY20 and FY21 by 3.1% and 2.9% due to 1) 4% domestic volume growth on a low base (4% in 1QFY19) 2) Inability to arrest decline in toothpaste market share (down ~30bps YTD) 3) heightened competitive intensity and trade promotions. Colgate is pinning hopes on monsoons and rural demand recovery to accelerate growth in 2HFY20. CLGT needs significant recovery in rural demand and increased traction in CDC and Colgate Swarna Vedshakti to arrest further decline in market share. We expect competitive intensity to remain high given renewed thrust by Patanjali and Vicco Vajardanti.

Outlook

We estimate 5.5% volume growth and 11.7% PAT CAGR over FY19-21. We value the stock at 36xJune21 EPS and assign a target price of Rs1208 (earlier 1220 at 36xFY21 EPS). Retain "Hold".