Hold Colgate Palmolive; target Rs 1560: Emkay

Emkay's report on Colgate Palmolive (India)

• Drive growth through innovations, market development and distribution - states Annual Report 2013
• Market share improvement, strong toothbrush volumes, focus on innovation, distribution expansion, capacity expansion and strong cash flow generation - Key positives
• Higher media spends and raw material cost impacts EBIDTA margin - Key negatives
• Rise in promotion activity is short term overhang on earnings.

"Annual Report 2013 emphasizes the importance of innovations, market development and distribution expansion to drive growth in oral care business. Colgate is driving market development through consumer awareness program like 'Brush at Night', 'Oral Health Month' and 'Bright Smiles, Bright Future'. Innovations are creating new segments like Gum Care, Sensitivity & Visible White. Colgate has launched Colgate Total Pro Gum Health and Colgate Visible White toothpaste in FY13. It has also launched Colgate MaxFresh and Colgate 360 (battery operated) in toothbrush category. Strong efforts on distribution are underway; wherein store coverage increased 40 percent and rural coverage increased by 25 percent in FY13." "The management exuberated confidence that the Oral Care category would continue to grow at a healthy pace given the size of the opportunity, but also cited that competition may intensify in near future. Emkay estimates for CP-India with underlying volume growth of 10- 11 percent is in sync with management commentary. However, launch of P&G in India, should drive promotions in the category. CP-India has increased media spends in FY13; higher promotion spends in FY14E should be underway. There is overhang on earnings in the short-run. We have tactical stand and maintain HOLD with PT of Rs 1560," says Emkay Global Financial Services research report. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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