September 3, 2019 1

Rating: REDUCE | CMP: Rs1,275 | TP: Rs1,159

Downgrade to reduce on poor growth visibility

Quick Pointers:

1Q20 toothpaste exit market share at 10-year low with 1.3% tonnage growth

Revival looks tough as naturals drive category growth (Colgate’s weakness)

Palmolive Facial bars unlikely to scale up given niche positioning and high price

We downgrade Colgate Palmolive from Hold to Reduce and cut EPS estimates

of FY20-21 by 0.9-1.3% given 1) 10- year low 1Q20 exit market share 2) 1Q

tonnage volume growth of just 1.3% and 3) slowdown in toothpaste segment

except naturals. However, Colgate is making a push for volumes led by 1)

30% increase in direct distribution 2) bringing family pack prices of Total

closer to CDC and 3) more offers in bundled packs. Instead of being more

aggressive for volume growth and market share expansion, Colgate has

taken 6-8% price increase post GST and operates at lifetime high margins. We

believe Colgate’s intent to achieve 6-7% volume growth looks difficult given

its weak positioning in high growth naturals segment and intense competition

from Dabur, Patanjali and other players in the naturals segment.

Although Colgate is indicating intent to grow personal care business (5% of

sales), its focus on niche premium segments (hand and body wash and now

Palmolive Facial bars) remains a hurdle. We believe CLGT will continue to

trade at a discount to peers due to single category dependence and sustained

loss of share in key category. We value the stock at 35xJune21 EPS (36x

earlier) and cut target price to Rs1160 (Rs1208 earlier). Downgrade to Reduce.

Toothpaste market share ~10-year low at sub 50%: Colgate’s exit market

share in 1Q20 has dipped below 50%, a 10-year low. Given ~88% category

penetration and Colgate’s dominant market share, sustained market share gain

is key to achieving reasonable growth. Although CLGT has seen reasonable

success in Swarna Vedshakti, it has not been able to neutralize the market

share loss in Total and Sensitive. Given weak position of Colgate in naturals

segment (15% growth), gaining back market share looks difficult.

Oral Care: Slew of measures to revive growth: Colgate has taken several

measures to revive volume growth which include 1) 30% increase in direct

distribution in FY19 and similar increase expected in FY20 2) reduction in pack

size of Total to bring outgo in line with other brands like CDC and Active Salt

3) increased for bundled packs in CDC, Total and Swarna Vedshakti and 4)

gradual increase in pack size of LUP’s. Despite poor volumes and competitive

intensity, all time high margins and 6-8% price increase suggest margin centric

approach of the company.

Personal care remains a pipe dream: Although Colgate has identified

Personal care as a key focus area, its focus on premium products in niche

categories remains an issue. We believe launch of Palmolive facial bars at

Rs60/75gm is unlikely to compete as it competes with Dove, Fiama Di wills and

host of other premium products. We believe that current pace of launches and

strategy is unlikely to scale up the personal care business in medium term.

Colgate Palmolive (CLGT IN)

September 3, 2019

Company Update

☑ Change in Estimates | ☑ Target | ☑ Reco

Change in Estimates

Current Previous

FY20E FY21E FY20E FY21E

Rating REDUCE HOLD

Target Price 1,159 1,208

Sales (Rs. m) 47,712 52,036 48,069 52,617

% Chng. (0.7) (1.1)

EBITDA (Rs. m) 13,931 15,113 14,039 15,286

% Chng. (0.8) (1.1)

EPS (Rs.) 29.1 32.4 29.4 32.9

% Chng. (0.9) (1.3)

Key Financials - Standalone

Y/e Mar FY18 FY19 FY20E FY21E

Sales (Rs. m) 41,880 44,624 47,712 52,036

EBITDA (Rs. m) 11,124 12,361 13,931 15,113

Margin (%) 26.6 27.7 29.2 29.0

PAT (Rs. m) 6,595 7,164 7,914 8,824

EPS (Rs.) 24.2 26.3 29.1 32.4

Gr. (%) 14.2 8.6 10.5 11.5

DPS (Rs.) 13.0 15.0 20.0 25.0

Yield (%) 1.0 1.2 1.6 2.0

RoE (%) 47.1 48.2 52.1 59.3

RoCE (%) 68.3 72.4 78.1 88.6

EV/Sales (x) 8.2 7.7 7.2 6.6

EV/EBITDA (x) 30.8 27.8 24.5 22.7

PE (x) 52.6 48.4 43.8 39.3

P/BV (x) 22.7 23.9 21.8 24.9

Key Data COLG.BO | CLGT IN

52-W High / Low Rs.1,356 / Rs.1,011

Sensex / Nifty 37,333 / 11,023

Market Cap Rs.347bn/ $ 4,844m

Shares Outstanding 272m

3M Avg. Daily Value Rs.1070.32m

Shareholding Pattern (%)

Promoter’s 51.00

Foreign 15.37

Domestic Institution 10.18

Public & Others 23.45

Promoter Pledge (Rs bn) -

Stock Performance (%)

1M 6M 12M

Absolute 9.1 2.1 11.3

Relative 9.2 (1.9) 15.3

Amnish Aggarwal

amnishaggarwal@plindia.com | 91-22-66322233

Nishita Doshi

nishitadoshi@plindia.com | 91-22-66322381

Colgate Palmolive

September 3, 2019 2

Oral Care: Will the Volume push work?

Given that oral care is more than 95% of sales for Colgate, growth in this category

is imperative for company growth. This is more so as Colgate is operating at lifetime

high gross and EBIDTA margins of 65.1% and 27.7%. Colgate has initiated several

steps to push growth rates in toothpaste segment:

30% increase in direct coverage in 2018

CLGT has been steadily increasing its distribution reach. Post demonetization and

GST, the wholesale channel has come under severe pressure due to regulatory

and liquidity concerns. Colgate has renewed its efforts to bolster its distribution by

1) increasing direct coverage by 30% in CY18 and is targeting another 30%

increase in CY19 2) it has increased indirect reach from 5mn outlets to 6mn in past

two years. We believe reduced reliance on wholesale channel is long term positive

as CLGT tends to be at a disadvantage in comparison to peers given limited width

of its product portfolio. Direct reach will enable the company to place better

assortments in the trade channel and improve penetration of premium products.

Colgate plans to increase direct coverage by 1.3xCY18 in 2019

100

180

230

299

0

50

100

150

200

250

300

350

CY12 CY17 CY18 CY19

Direct reach indexed to CY12

Source: Company, PL

Rejig in Grammage and pricing strategy

Colgate has been on the receiving end with loss of more than 800bps market share

since naturals wave picked up (led by Patanjali and Dabur). Past few years have

seen naturals segment growing in high double digits even as other segments in

toothpaste have suffered. Colgate has now devised a multi-pronged strategy to

push for volumes in the toothpaste segment.

Premiumisation back on track: Naturals segment growth has softened to

~15%, although it is still growing far ahead of the category. After a gap of 4

years premium multi benefit segment (Total and Sensitive) is showing some

signs of revival and consumer interest. Colgate is well placed to capitalize on

the same given strong brands and value added variants in the segment.

Colgate Palmolive

September 3, 2019 3

Improving affordability with smaller pack sizes: Colgate has launched

smaller packs of premium brands like Total and Sensitive to increase their

affordability. Colgate reduced the pack size of Total from 150gm to 140gms

and now to 120gms, to bring the MRP (Rs92) below Rs100 and is in line with

the pricing of 200gms of family packs of Colgate Dental cream and Active salt.

This will enable the company enable sift from mass segment family toothpaste

to premium offering like Total which has been on the receiving end due to pick

up in the Naturals segment.

Volume push with bundled packs: Colgate has increased consumer

discounts and offerings to push volumes through offers like 1+1 or a free

smaller SKU or free toothbrush. Our channel checks suggest that the shelf

space occupied by all the major brands was maximum for bundled packs. CDC

is giving 100gm free on bundled pack of two tubes of 200gm each. Colgate

Total has 2 packs of 120gms each and 1 pack of 65gms free. Swarna

Vedshakti is giving Rs17 off on two packs of 200gm each.

Bundled packs occupy the highest shelf space

Source: Company, PL

LUP’s are becoming bigger: Even as Colgate has made bigger pack sizes

smaller in a few brands like Total, it is gradually increasing the size of low unit

packs. Rs5 pack of CDC has been gradually phased out and replaced by Rs10

pack. The company is toying with the idea of shifting the LUP price point to

Rs15-20 over a period of time. The larger sized LUP’s will push volume growth

higher and also induce brushing habit amongst people.

Colgate Palmolive

September 3, 2019 4

Toothpaste segment hit on various fronts

Colgate market share at ~10-year low, touches sub 50% levels

Colgate Palmolive closed 1QFY20 with sub 50% volume market share in

toothpaste, lowest since 3QFY09 (49.6%) with value share being 20/30bps lower

than volume share. Colgate has thus lost ~800bps of volume share in toothpaste

(peak of 57.9% in 1HCY15) post shift to naturals segment led by Patanjali and

Dabur. Although Colgate’s efforts and innovations curtailed the speed of decline in

2H18, it is far away from gaining back lost share (June 19 YTD Market share

declined 20bps QoQ).

Colgate has lost ~800bps of market share in past 4 years

Source: Company, PL

Aggressive competition pushes Colgate’s share below 50%

48.8 49.452.2 53.3 52.7 54.5 56.1 56.8 57.2 55.5 53.6 52.4

50

25.1 24.6 22.8 22.6 23.3 23.5 22.8 21.7 19.8 19.2 17.7 17.3 18

11.9 12.2 12.9 13.7 14.8 14 13.4 13.4 14 15.3 15.4 15.1 15

0.1 0.4 0.6 1.2 2.9 6.8 8.6 8.60

10

20

30

40

50

60

CY

07

CY

08

CY

09

CY

10

CY

11

CY

12

CY

13

CY

14

CY

15

CY

16

CY

17

CY

18

YT

D

To

oth

paste

Vo

lum

e s

hare

%

Colgate Dabur HUL Patanjali

Source: Company, PL

Natural’s wave in the toothpaste segment has impacted Colgate massively as

two of its most premium brands i.e. Colgate Total and Sensitive have lost share

from a cumulative 7% to 3%. In addition, CLGT lost share in Cibaca and Active

Salt. Loss of market share to mass priced Patanjali and Dabur Red (Rs75 and

Rs86/200gm) from higher priced products (Total, Sensitive and Active Salt)

shows down trading for product related efficacy and shift towards naturals.

56.7 57.8

57.9

57.6

57.3

55.3

55.9

55.7

55.7

55.1

54.7

54

53.7

53.4

52.4

52.5

52.5

52

50

46

48

50

52

54

56

58

60

Jan -

Dec 1

4

Jan -

Apr 15

Jan -

June 1

5

Jan -

Sep 1

5

Jan -

Dec 1

5

Jan -

Apr 16

Jan -

June 1

6

Jan -

Sept 16

Jan -

Dec 1

6

Jan -

Apr 17

Jan -

June 1

7

Jan -

Aug 1

7

Jan -

Dec 1

7

Jan -

Mar 18

Jan -

June 1

8

Apr-

Sept 18

Apr-

Dec 1

8

Apr-

Marc

h 1

9

Jan -

June 1

9Tooth

paste

Volu

me S

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(%

)

Colgate Palmolive

September 3, 2019 5

Colgate has strengthened its offering in the naturals segment by launch of

Cibaca Vedshakti at the mass end as the brand has more resonance in North

India (Patanjali’s strength), however it has not been able to make a major dent.

Colgate’s Swarna Vedshakti is gaining traction, however, its premium pricing

at Rs 92 for 200gms compared to Patanjali’s Dant Kanti (Rs 75/200gms) and

Dabur Red (Rs86/200gms) limits the scope of market share gains.

Swarna Vedshakti is at a premium to Patanjali and Dabur

Naturals Segment Grammage MRP

Cibaca Vedshakti Economy 175gms 55

Patanjali Dant Kanti Popular 200gms 75

Swarna Vedshakti Popular 200gms 92

Dabur Red Popular 200gms 86

Vicco Vajradanti Popular 200gms 115

Source: Company, PL

Industry growth moderation in non-naturals negative for

Colgate

Toothpaste market has been no exception to the current slowdown witnessed by

various sectors. Toothpaste Industry volumes grew by ~6.5% in CY17 (on a low

base of 2.1% and 0.1% in 2016 and 2015) and 7.7% in CY18, past three-year

average also suggests sustainable volume growth of ~5-6%. Although per capita

consumption in India at 180gm remains low, the expectation of volume growth led

by twice a day brushing habit has not fructified so far. This coupled with high

dentifrice penetration at over 90% means only mid- single digit volume growth for

the Industry. Since past 3 years, category growth is being led by the naturals

segment. Overall industry growth rate has moderated in past two quarters due to

1) moderation of growth rate in naturals segment from earlier ~18/20% to the

current ~15% and 2) volume decline in non- naturals segment in since 4Q19.

We believe Colgate needs to lead industry growth and gain share in order to sustain

volume growth in mid to high single digits, as it has close to 50% share of the

market. Given that Colgate is facing stiff competition from Dabur and Patanjali, this

looks like a daunting task to grow ahead of the market.

Toothpaste market growth is est at 6.5% in CY18

-2.6

0.1

2.1

7.4

6.5

-4

-2

0

2

4

6

8

CY14 CY15 CY16 CY17 CY18E

Industry Volume growth %

Source: Company, PL

Colgate Palmolive

September 3, 2019 6

Volume growth basis shifted to packs, Adj volumes up

1.3% only

Colgate’s reported volume growth number was in tonnage till 4QFY19. However,

the company has taken 2 rounds of grammage reduction in April and in June in

price pointed packs of Rs10 and Rs20. Given that Rs10 packs are a good chunk of

volumes in CDC, the tonnage volume growth does not reflect the exact growth in

number of packs. Colgate has thus shifted to reporting of volume growth to dozens

of toothpaste packs sold versus the previous year (1Q growth of 4%). Adjusting for

this, the actual tonnage volumes grew by only ~1.3% in 1Q which was much lower

than expectations. Colgate shall continue to report volumes in dozens of toothpaste

packs basis in the coming quarters.

Equated volume Growth has moderated since January’19

53 3

1

4 5 4

-12

-3-5

-1

12

4 4

7 7

3 4

-15

-10

-5

0

5

10

15

4Q

FY

15

1Q

FY

16

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16

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16

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17

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17

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17

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FY

18

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18

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FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

(%)

Source: Company, PL

6-8% price increases post GST, margins at life time high

Colgate has benefitted from introduction of GST vis-à-vis competitors in the naturals

space who were earlier facing lower taxation under excise and VAT. Colgate had

reduced prices to pass on GST benefits to the customers when rates were cut from

28% to 18%. However, it has been gradually increasing prices after that, and the

prices are up by 6-8% from post GST levels. We note that margin centric approach

continues as Colgate’s gross margins increased by 150bps and EBIDTA by 100bps

in the past 5 quarters to 65.9% and 27.6% respectively. We believe pricing strategy

with focus on margins seems to ignore the sustained loss of market share and

below industry average volume growth.

Prices almost nearing pre-GST levels

Toothpaste Grammage Pre GST Post GST July'19

Colgate Herbal 200gms 95.00 88.00 93.00

Colgate Active Salt 200gms 96.00 90.00 95.00

Colgate Visible White Mint 100gms 95.00 88.00 93.00

Colgate CDC 100gms 52.00 46.00 50.00

Colgate Maxfresh Red 80gms 52.00 48.00 70gms for Rs48

Source: Company, PL

Colgate Palmolive

September 3, 2019 7

Personal care remains a pipe dream

Colgate has identified Personal care as their second leg of growth. It has shown a

little bit of more seriousness in launching new products beyond oral care, however

the pace and initiatives leave a lot to be desired and it has failed to scale up this

portfolio with a steady 4-5% of sales contribution since the past 4 years.

More learnings from Parent company: The parent company has an array of

offerings in personal care ranging hand wash, body wash, deodorants, lotions,

facial bars etc. They have created multiple brands (Palmolive, Protex, Sanex,

Softsoap, GARD, speed stick, Toms, Afta, Tahiti and Irish Spring) which cater to

mass as well as premium segment which gives an edge to diversify and straddle

through the price pyramid.

Parent receives 20% sales from Personal care

Oral Care47%

Personal care

20%

Home Care18%

Pet nutrition15%

Colgate Palmolive US (% of Sales CY18)

Source: Company, PL

Oral care dominates Colgate Palmolive India

Oral Care96%

Personal care

4%

Colgate Palmolive India (% of Sales FY19)

Source: Company, PL

Colgate exited major personal care segments by 2001: Colgate has always

been associated with Oral care in India. It has presence in a few adjacent categories

like shampoo (Halo), Skin creams (Charmis) and Grooming (Palmolive Shaving

cream). However, post liberalization of economy Colgate ventured into Toilet Soaps

(Protex and Palmolive) initially at premium end and later took Palmolive to mass

end. It also launched Axion Dish washing paste and Palmolive Optima shampoo.

However, citing poor margin profile in soaps and limited success in shampoos, it

exited both of these by 2001.

Colgate operates in hand wash and body wash in niche segments: Colgate

made foray into skin care segment with hand and body washes under Palmolive

brand and premium positioning. Although it was amongst first companies to enter

the market, it was never able to scale that up when players like aggression by HUL,

ITC etc. went aggressive in the market place across price segments. Colgate has

been trying to skim the market and trying to find a niche in premium segment, which

shows lack of risk taking tendency and commitment to broad base the sales mix of

the company. Colgate has been avoiding to take players like HUL, P&G and Reckitt

head-on, which has resulted in dependence on a single category.

It becomes difficult to replicate the global success as the Indian weather, taste and

preferences are quite different and hence require tweaking and modifying the

product characteristics. Currently, Colgate India imports products without any

modifications resulting in lackluster success in the past 4 years.

Colgate Palmolive

September 3, 2019 8

Half-hearted effort in Facial bars: In FY19, Colgate launched Palmolive facial

bars in the premium naturals segment to re-enter the toilet soap category that they

had long ago exited in India. The product positioned on the herbal platform at

Rs55/75gms. It has TFM of only 60% and is available in variants like Charcoal,

Orange (Vitamin C&E) and Tamarind & Turmeric. We see little chances of success

given that it competes with Dove (Rs50/100gm) Fiama gel Bars (Rs67/125gm) and

Pears Herbal variants at (Rs64/125gm). The prices are on par/premium with other

herbal brands like Boutique and Khadi. However, the half-hearted effort so far

makes it highly unlikely for personal care to make any medium term impact.

Personal care has only 1 new product added in the past 8 years

Source: Company, PL

Colgate Palmolive

September 3, 2019 9

Financials

Income Statement (Rs m)

Y/e Mar FY18 FY19 FY20E FY21E

Net Revenues 41,880 44,624 47,712 52,036

YoY gr. (%) 5.2 6.6 6.9 9.1

Cost of Goods Sold 14,901 15,586 16,466 17,919

Gross Profit 26,979 29,039 31,247 34,117

Margin (%) 64.4 65.1 65.5 65.6

Employee Cost 3,059 2,959 3,318 3,723

Other Expenses 3,395 3,852 3,905 4,269

EBITDA 11,124 12,361 13,931 15,113

YoY gr. (%) 17.9 11.1 12.7 8.5

Margin (%) 26.6 27.7 29.2 29.0

Depreciation and Amortization 1,565 1,592 2,070 1,928

EBIT 9,559 10,769 11,861 13,185

Margin (%) 22.8 24.1 24.9 25.3

Net Interest - 25 110 116

Other Income 388 377 424 464

Profit Before Tax 9,947 11,121 12,175 13,534

Margin (%) 23.8 24.9 25.5 26.0

Total Tax 3,352 3,956 4,261 4,710

Effective tax rate (%) 33.7 35.6 35.0 34.8

Profit after tax 6,595 7,164 7,914 8,824

Minority interest - - - -

Share Profit from Associate - - - -

Adjusted PAT 6,595 7,164 7,914 8,824

YoY gr. (%) 14.2 8.6 10.5 11.5

Margin (%) 15.7 16.1 16.6 17.0

Extra Ord. Income / (Exp) 139 591 - -

Reported PAT 6,734 7,756 7,914 8,824

YoY gr. (%) 16.6 15.2 2.0 11.5

Margin (%) 16.1 17.4 16.6 17.0

Other Comprehensive Income - - - -

Total Comprehensive Income 6,734 7,756 7,914 8,824

Equity Shares O/s (m) 272 272 272 272

EPS (Rs) 24.2 26.3 29.1 32.4

Source: Company Data, PL Research

Balance Sheet Abstract (Rs m)

Y/e Mar FY18 FY19 FY20E FY21E

Non-Current Assets

Gross Block 19,983 22,069 24,169 26,269

Tangibles 19,077 21,162 23,262 25,362

Intangibles 907 907 907 907

Acc: Dep / Amortization 8,524 10,116 12,186 14,114

Tangibles 7,617 9,209 11,280 13,207

Intangibles 907 907 907 907

Net fixed assets 11,459 11,953 11,983 12,155

Tangibles 11,459 11,953 11,983 12,155

Intangibles - - - -

Capital Work In Progress 1,586 1,500 1,500 1,500

Goodwill - - - -

Non-Current Investments 573 581 591 602

Net Deferred tax assets (355) (474) (602) (743)

Other Non-Current Assets 1,414 1,567 1,710 1,877

Current Assets

Investments 2,817 1,207 3,014 1,025

Inventories 2,267 2,826 2,852 3,044

Trade receivables 2,010 2,186 2,078 2,125

Cash & Bank Balance 1,745 2,365 2,223 2,915

Other Current Assets 795 886 948 1,034

Total Assets 25,639 26,048 27,884 27,269

Equity

Equity Share Capital 272 272 272 272

Other Equity 14,974 14,228 15,603 13,627

Total Networth 15,246 14,500 15,875 13,898

Non-Current Liabilities

Long Term borrowings - - - -

Provisions 191 237 265 298

Other non current liabilities 5 5 5 5

Current Liabilities

ST Debt / Current of LT Debt - - - -

Trade payables 6,145 6,436 6,753 7,083

Other current liabilities 3,683 4,382 4,370 5,227

Total Equity & Liabilities 25,639 26,048 27,884 27,269

Source: Company Data, PL Research

Colgate Palmolive

September 3, 2019 10

Cash Flow (Rs m)

Y/e Mar FY18 FY19 FY20E FY21E Year

PBT 9,947 11,121 12,175 13,534

Add. Depreciation 1,565 1,592 2,070 1,928

Add. Interest - 25 110 116

Less Financial Other Income 388 377 424 464

Add. Other 166 608 18 19

Op. profit before WC changes 11,678 13,346 14,373 15,596

Net Changes-WC (1,499) 1,774 (1,487) 2,841

Direct tax (3,352) (3,956) (4,261) (4,710)

Net cash from Op. activities 6,827 11,164 8,625 13,727

Capital expenditures (1,863) (2,000) (2,100) (2,100)

Interest / Dividend Income - - - -

Others 0 0 - -

Net Cash from Invt. activities (1,863) (2,000) (2,100) (2,100)

Issue of share cap. / premium 3 1 1 1

Debt changes - - - -

Dividend paid (4,256) (8,519) (6,558) (10,820)

Interest paid - (25) (110) (116)

Others - - - -

Net cash from Fin. activities (4,253) (8,543) (6,667) (10,935)

Net change in cash 712 620 (142) 692

Free Cash Flow 4,964 9,164 6,525 11,627

Source: Company Data, PL Research

Quarterly Financials (Rs m)

Y/e Mar Q2FY19 Q3FY19 Q4FY19 Q1FY20

Net Revenue 11,680 10,994 11,538 10,849

YoY gr. (%) 7.7 6.4 5.7 4.2

Raw Material Expenses 4,115 3,833 4,088 3,704

Gross Profit 7,565 7,161 7,449 7,145

Margin (%) 64.8 65.1 64.6 65.9

EBITDA 3,296 3,145 3,104 2,998

YoY gr. (%) 9.6 11.3 0.9 6.5

Margin (%) 28.2 28.6 26.9 27.6

Depreciation / Depletion 398 406 394 499

EBIT 2,897 2,739 2,711 2,500

Margin (%) 24.8 24.9 23.5 23.0

Net Interest - - 25 23

Other Income 86 79 120 152

Profit before Tax 2,984 2,818 2,805 2,628

Margin (%) 25.5 25.6 24.3 24.2

Total Tax 1,020 986 990 937

Effective tax rate (%) 34.2 35.0 35.3 35.7

Profit after Tax 1,964 1,831 1,815 1,691

Minority interest - - - -

Share Profit from Associates - - - -

Adjusted PAT 1,964 1,831 1,815 1,691

YoY gr. (%) 10.6 7.3 (0.6) 8.8

Margin (%) 16.8 16.7 15.7 15.6

Extra Ord. Income / (Exp) - 90 161 -

Reported PAT 1,964 1,921 1,976 1,691

YoY gr. (%) 10.6 12.6 4.7 (10.8)

Margin (%) 16.8 17.5 17.1 15.6

Other Comprehensive Income - - - -

Total Comprehensive Income 1,964 1,921 1,976 1,691

Avg. Shares O/s (m) 272 272 272 272

EPS (Rs) 7.2 6.7 6.7 6.2

Source: Company Data, PL Research

Key Financial Metrics

Y/e Mar FY18 FY19 FY20E FY21E

Per Share(Rs)

EPS 24.2 26.3 29.1 32.4

CEPS 30.0 32.2 36.7 39.5

BVPS 56.1 53.3 58.4 51.1

FCF 18.3 33.7 24.0 42.7

DPS 13.0 15.0 20.0 25.0

Return Ratio(%)

RoCE 68.3 72.4 78.1 88.6

ROIC 67.2 61.4 77.5 78.5

RoE 47.1 48.2 52.1 59.3

Balance Sheet

Net Debt : Equity (x) (0.3) (0.2) (0.3) (0.3)

Net Working Capital (Days) (16) (12) (14) (13)

Valuation(x)

PER 52.6 48.4 43.8 39.3

P/B 22.7 23.9 21.8 24.9

P/CEPS 42.5 39.6 34.7 32.2

EV/EBITDA 30.8 27.8 24.5 22.7

EV/Sales 8.2 7.7 7.2 6.6

Dividend Yield (%) 1.0 1.2 1.6 2.0

Source: Company Data, PL Research

Colgate Palmolive

September 3, 2019 11

Price Chart Recommendation History

No. Date Rating TP (Rs.) Share Price (Rs.)

1 18-Jul-19 Hold 1,208 1,204

2 04-Jul-19 Hold 1,220 1,152

3 27-May-19 Hold 1,220 1,180

4 05-Apr-19 Hold 1,258 1,227

5 24-Jan-19 Hold 1,245 1,322

6 07-Jan-19 Hold 1,157 1,303

7 29-Oct-18 Hold 1,157 1,102

8 05-Oct-18 Reduce 1,084 1,069

Analyst Coverage Universe

Sr. No. Company Name Rating TP (Rs) Share Price (Rs)

1 Asian Paints Accumulate 1,522 1,479

2 Avenue Supermarts Hold 1,338 1,359

3 Britannia Industries Accumulate 3,068 2,602

4 Colgate Palmolive Hold 1,208 1,204

5 Crompton Greaves Consumer Electricals BUY 297 225

6 Dabur India Hold 437 429

7 Emami Accumulate 386 310

8 Future Retail BUY 512 395

9 GlaxoSmithKline Consumer Healthcare Hold 7,972 7,473

10 Hindustan Unilever Accumulate 1,816 1,690

11 ITC BUY 367 265

12 Jubilant FoodWorks BUY 1,459 1,153

13 Kansai Nerolac Paints Accumulate 479 434

14 Marico Hold 357 363

15 Nestle India Hold 10,900 12,004

16 Pidilite Industries Accumulate 1,301 1,290

17 Titan Company BUY 1,173 1,047

18 Voltas Hold 609 601

PL’s Recommendation Nomenclature (Absolute Performance)

Buy : > 15%

Accumulate : 5% to 15%

Hold : +5% to -5%

Reduce : -5% to -15%

Sell : < -15%

Not Rated (NR) : No specific call on the stock

Under Review (UR) : Rating likely to change shortly

879

997

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1232

1350

Se

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16

Mar

- 17

Au

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17

Feb

- 1

8

Au

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18

Feb

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9

Au

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19

(Rs)

Colgate Palmolive

September 3, 2019 12

ANALYST CERTIFICATION

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