YES Securities' research report on Colgate-Palmolive (India)
Colgate-Palmolive (India) Ltd. (CLGT) delivered decent performance in 2QFY23 as its margin delivery fully offset slightly miss on topline. Even while volume growth seems to be lower than our estimate as we were expecting benefit from category growth recovery as highlighted in recent analyst meet, it seems to be in-line with consensus. As highlighted earlier by the management, gross margins are now seeing modest improvement compared to earlier quarters. CLGT has sharply picked-up advertising cost in 1HFY24 (+140bps YoY to 13.9%), but savings in other expenses have led to improvement in EBITDA margin profile. CLGT is now also making effort to drive consumption by highlighting importance of night time brushing through its recent ad. We believe, recent relaunch/restaging of key brands and above activations, should support growth in near term. Any improvement in market growth rates, especially in rural, should only further accelerate the volume growth momentum.
Outlook
We continue to assign ~41x and roll-forward our target price to Sept’2025E EPS (3yr/5yr avg fwd. multiple: ~39x), giving us a revised target price (TP) of Rs2,080 (Rs2,000 earlier). We thus continue to maintain our NEUTRAL rating. For further rerating in near term, rural recovery and market share improvement in core is much needed.
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