Colgate-Palmolive (India) (Q3 FY14)

India Infoline News Service | Mumbai |

Colgate has witnessed significant volume market share gains of 150bps yoy at 56% in toothpaste category during Jan-Dec’13.

CMP Rs1,312, Target Rs1,304, Downside 0.6%
  • Colgate matched our expectations by recording 15.9% yoy revenue growth at Rs8.8bn during Q3 FY14. Colgate reported a healthy 10% yoy volume growth led by toothpaste brands like Colgate Dental Cream, Active Salt, Max Fresh, Colgate Total and Colgate Visible White. Core toothpaste segment witnessed strong 11% yoy volume growth led by the flagship brands.


  • Colgate has witnessed significant volume market share gains of 150bps yoy at 56% in toothpaste category during Jan-Dec’13. Market share in the toothbrush segment increased sharply by 170bps yoy to 41.5% during Jan-Dec’13.

Healthy volume growth and market share gains across portfolio (%)
Operational Metrics
Q3 FY14
Q3 FY13
% yoy
Total volume growth
10.0
9.0
100bps
Toothpaste volume growth
11.0
10.0
100 bps
Toothpaste Market share*
56.0
54.5
150 bps
Toothbrush Market share*
41.5
39.8
170 bps
Source: Company, India Infoline Research
* Market share for Jan-Dec'13 Vs Jan-Dec'12

  • Operating margins for the quarter declined by 70bps to 16.2% due to sharp 310bps/250bps increase in overhead / outsourcing cost respectively. 60bps increase in advertising cost (higher competitive activity) further put pressure on margins. We believe with the Oral B launch and increasing competition in the oral care sector, requirement of higher adspends will keep Colgate’s operating margins under check.

Cost analysis
As a % of net sales
Q3 FY14
Q3 FY13
bps yoy
Q2 FY14
bps qoq
Material cost
28.9
32.2
(327)
28.1
83
Purchase of FG
10.2
7.7
246
12.3
(215)
Personnel cost
6.0
8.3
(228)
6.0
2
Advertising cost
13.7
13.1
65
13.3
40
Other overheads
24.9
21.8
311
24.5
45
Total costs
83.8
83.1
67
84.2
(45)
Source: Company, India Infoline Research
  • Effective tax rate for the quarter was higher at 27%. With larger proportion of production coming from non-tax exempt zone (Baddi) the tax rate is expected to increase further (29% FY14E, 30% FY15E). Other operating revenues declined by ~66% yoy to Rs71mn, as the company sold out the Global Shared Services arm to its parent. Impacted by higher operational costs and lower other income net profit for the quarter increased by mere 1.6% yoy to Rs1.1bn – in line with our expectations.


  • We lower our revenue and PAT estimates for FY14 and FY15 to factor in intensified competition in the market.

Changes in estimates
 
FY14E
FY15E
Changes in estimates
New
Old
Change (%)
New
Old
Change (%)
Net sales
35,638
36,524
(2.4)
41,266
41,972
(1.7)
EBITDA
6,392
6,715
(4.8)
7,814
8,010
(2.5)
OPM (%)
17.9
18.4
(0.5)
18.9
19.1
(0.2)
PAT
4,673
5,007
(6.7)
5,594
5,910
(5.3)
EPS
BSE 1,051.75 [17.25] ([1.61]%)
NSE 1,050.70 [16.35] ([1.53]%)

***Note: This is a NSE Chart

 

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