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What should investors do with Colgate-Palmolive post-Q3 result: buy, sell or hold?

The FMCG firm reported a 24.74 percent increase in net profit at Rs 248.36 crore in the December quarter. Total income stood at Rs 1,241.81 crore, up 7.70 percent compared to Rs 1,152.97 crore in the year-ago quarter.

January 29, 2021 / 10:22 AM IST
 
 
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Colgate Palmolive (India) share price added over a percent intraday on January 29, a day after the FMCG firm reported a 24.74 percent increase in net profit at Rs 248.36 crore in the third quarter ended in December. The company had posted a net profit of Rs 199.1 crore in the same quarter a year ago.

Total income during the period under review stood at Rs 1,241.81 crore, up 7.70 percent, as compared to Rs 1,152.97 crore in the year-ago quarter, Colgate-Palmolive (India) said in a regulatory filing.

"We are very pleased with not only the continued momentum on the business but also the quality of the results... Our strategic and disciplined approach to building brands, driving innovation, and relentless focus on winning on the ground continues to deliver as per our expectations," Ram Raghavan, Managing Director at Colgate-Palmolive (India) Ltd, said.

The stock was trading at Rs 1,585.90, up Rs 22.15, or 1.42 percent, at 0938 hours. It has touched an intraday high of Rs 1,588.55 and an intraday low of Rs 1,568.80.

Here is what some brokerages have to say about the stock and the company after the Q3 numbers:

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Credit Suisse

Global research firm Credit Suisse has an outperform rating on the stock and has raised the target to Rs 1,750 per share. The company reported double-digit revenue growth and margin expansion despite ad spends. The brokerage firm increase FY21-23 earnings by 3 percent, a CNBC-TV18 report said.

The December quarter has been the first quarter of double-digit revenue growth in five years, it said.

Jefferies

Research firm Jefferies has a buy rating with the target at Rs 1,850 per share. The company saw double-digit growth in domestic revenue, with volumes contributing nearly half to this. A favourable mix allowed the firm to report a near record-high gross margin.

Jefferies believes that earnings growth at 25 percent YoY is impressive with 9M also at 25 percent. It has raised EPS estimates by 3-6 percent.

CLSA

CLSA has retained the outperform call on Colgate with the target at Rs 1,800 per share. Focussed premiumisation and linking brand with purpose are aiding growth, the brokerage house said.

CLSA continues to see renewed thrust in the core, saying the company's focus on expanding oral care and strengthening go-to-market will shape its future.

Dolat Capital

Colgate’s Q3FY21 revenue and EBITDA were in line with expectations but APAT was marginally ahead. The domestic business posted 10.1 percent sales growth during the quarter. All categories witnessed growth driven by household penetration.

The government's efforts to increase farmer wages and focus on rural infrastructure should boost the oral-care category. However, an increase in competition and better product offerings by competitors like Dabur remains a key challenge for Colgate.

The brokerage revised FY21/22/23E EPS estimates to Rs 36.1/36.9/40.9. It has valued the stock at 43x FY23 EPS (in line with peers) to arrive at a target of Rs 1,760 and upgraded the stock to accumulate.

Prabhudas Lilladher

The research house changed EPS estimates by -0.4 percent/2.6 percent and 5.2 percent for FY21, FY22 and FY23 due to superior sales mix, the come back of the premium segment in toothpastes and improving traction in Palmolive handwash and shower gel. Domestic volume and value growth have been 5 percent while a decline in exports has hit overall sales growth.

Rural demand remains strong, though toothpaste remains highly competitive and penetrated category. The company has accelerated its effort to gain market share by sustained innovations, brand building by ad spends and ensuring shelf availability.

The brokerage estimates 11.3 percent EPS CAGR over FY20-23 and 9.1 percent CAGR over FY21-23. It values the stock at 40xFY23 (66 percent ROE and 85 percent dividend payout) and arrived at a target price of Rs 1,651 and retains the hold call on the stock.

Disclaimer: The views and investment tips expressed by experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sandip Das
first published: Jan 29, 2021 10:22 am

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