Buy Colgate Palmolive Ltd Target Rs.1,793 - Sushil Finance
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CONTINUED INNOVATION WILL ENSURE THE COMPANY TO SUSTAIN ITS LEADERSHIP POSITION.
The company focuses on innovation in the personal care segment specifically the oral care segment which accounts for 90% of the company’s total sales. The company’s constant efforts to increase brand recall and market leadership position enables them to improve its market share in the industry. Colgate has thus launched a number of products in line with evolving needs and preferences of consumers. The launch of these products was complemented by the company’s existing best-in-class distribution network across the country. The company has not only taken advantage of the upgrading traditional distribution network but also of eB2C, eB2B and OTO channels which have emerged as a strong distribution network and have been instrumental during various lockdown phases.
HEALTHY FINANCIAL PROFILE ENABLES THE COMPANY TO STRONG ARM ANY ADVERSE MARKET TAILWINDS.
During the four years ending March 31, 2021, the company’s turnover has grown at a CAGR of ~5% along with considerable margin expansion. The company continues to be debt free and generated free cash flow to the tune of ~Rs 700 Cr in FY21.
OUTLOOK & VALUATION
The company has launched a number of products in FY21 and the same have gain traction during H1FY22. Owing to the recovery in the industry and increased traction in the business of the company, we have forecasted annual sales growth of 5% and 8% in FY22E and FY23E derived a revenue of Rs. 5,487.1 cr for FY23E. We expect the PAT margins to be 21.9% in FY23E and EPS of Rs. 44.3. As we assign a P/E multiple of ~41X we arrive at a price target of Rs. 1,793 which gives us an upside of ~23% from CMP of Rs. 1,448. Hence, we reinstate coverage on Colgate Palmolive (India) Ltd with a BUY rating over an investment horizon of 18- 24 months.
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