Colgate recorded 14.7% yoy growth in revenues at Rs8.4bn during Q1 FY14 – marginally below our expectations of Rs8.6bn.
As a % of net sales |
Q1 FY14 |
Q1 FY13 |
bps yoy |
Q4 FY13 |
bps qoq |
Material cost |
28.3 |
32.9 |
(462) |
31.9 |
(356) |
Purchase of FG |
10.5 |
7.8 |
276 |
7.8 |
273 |
Personnel cost |
7.3 |
8.5 |
(114) |
8.6 |
(124) |
Advertising cost |
12.0 |
11.4 |
63 |
10.1 |
189 |
Other overheads |
24.0 |
20.1 |
393 |
23.3 |
72 |
Total costs |
82.2 |
80.6 |
157 |
81.7 |
54 |
Colgate continues to dominate the oral care industry despite stiff competition from players like HUL and Dabur. We expect the competitive activity to intensify further (HUL, P&G and GSK Consumer) resulting in higher adspend for gaining/protecting market share. Higher adspend and tax outgo (higher production from non-tax free zone) are likely to put pressure on profitability. We expect Colgate to witness ~16% CAGR in revenues and net profit respectively over FY13-15. At the current market price of Rs1,349, the stock is trading at 27.2x FY15E EPS of Rs49.6. Maintain Market Performer rating with a revised 9-mth price target of Rs1,438 (earlier Rs1,523).
Results table