Axis Direct's research report on Colgate-Palmolive
Net sales, EBITDA and adj. PAT declined 9%/10%/14%. With mid-single digit price hike, volume declined 12% in Q3FY17. Toothpaste and toothbrush market share stood at 54.5% (down 190bps YoY) and 48.2% (up 290 bps YoY). Higher other operating expenses (+219 bps YoY at 22.6%) and employee costs (+60 bps YoY at 7.5%) negated benefits of lower RM costs (-69 bps YoY at 36.5%) and A&P spend (down 20% in absolute term), leading to an EBITDA margin decline of 42 bps YoY to 24.7%.
OutlookTo capture demonetization impact, we cut out topline estimates by 7% each, which after margin adjustments lead to 10-11% cut in our EPS estimates for FY17 and FY18. We maintain our HOLD with a revised TP of Rs 840 (Rs 910 earlier) based on forward P/E of 30x.
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