Hold Colgate Palmolive; target of Rs 1445: Prabhudas Lilladher

Prabhudas Lilladher's research report on Colgate Palmolive

We are increasing FY21/22/23 EPS estimates by 8.1/4.2/4.3% and recommendation to Hold as benign input costs and superior mix aid margins, although we await sustenance of volume and market share gains in a highly saturated category. CLGT posted a strong set of numbers with 7.1% domestic sales growth led by volume growth of 4% and superior mix enabled by higher sales of premium products and gains from superior supply chain and shelf availability. Although volume and sales growth seems tepid relative to double digit oral care sales growth of HUL. Personal care segment grew faster led by sanitizers and hand wash, although it remains just 5% of sales.

Outlook

We estimate 16% PAT growth in FY21 but 6.1% CAGR over FY21-23 as we expect margin contraction due to higher ad spends. We value the stock at 38xSept 22 and arrive at a target price of Rs1445 (Rs1350 based on 37xSept 22 earlier). Upgrade to Hold.

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