IGI Logo

Resilient performance; Outlook positive

Colgate-Palmolive (India) Ltd. manufactures consumer products in the oral care and body care area. The company’s products include soaps, cosmetics, toilet preparations, toothpaste, toothbrushes, shaving brushes and glycerin.

* Q3FY22 standalone revenue grew 3.8% YoY to Rs. 1,271cr (-5.4% QoQ), aided by price hikes and brand penetration.

* Despite input cost inflation and higher employee spends, EBITDA rose 2.7% YoY to Rs. 381cr (-5.0% QoQ), although EBITDA margin shrank 40bps YoY to 29.9% (+10bps QoQ). PAT was up 1.6% YoY (-6.2% QoQ).

* Investments in innovations and new product launches, coupled with advertising and digital transformation measures would contribute to revenue growth in future. The stock is currently trading at attractive valuations. Hence, we upgrade our rating on the stock to BUY with a rolled forward TP of Rs. 1,690 based on 34x FY24E adj. EPS.

Aggressive pricing aids topline

In Q3FY22, standalone revenue rose 3.8% YoY to Rs. 1,271cr (-5.4% QoQ) driven by price hikes and brand penetration across product categories. CPIL will continue to take calibrated pricing actions and implement a range of productivity measures to offset elevated levels of cost inflation in commodities and logistics. In personal care segment, it plans to invest in innovations at formulation and ingredient level to tackle supply related difficulties.

Lower AD spends offset spike in raw material costs & employee spends

Gross profit stood flat YoY at Rs. 847cr (-8.4% QoQ), however gross margin contracted 220bps YoY to 66.6% owing to inflationary input cost pressure (+70bps YoY, +30bps QoQ) and higher purchases of stock in trade (+150bps YoY, +90bps QoQ). However, EBITDA rose 2.7% YoY to Rs. 381cr (-5.0% QoQ), despite EBITDA margin falling 40bps YoY to 29.9% (+10bps QoQ) mainly due to lower advertising and publicity costs (- 430bps YoY, -190bps QoQ), partially offset by higher employee costs (+80bps YoY, +10bps QoQ). Resultantly, PAT grew 1.6% YoY to Rs. 252cr (-6.3% QoQ).

Key highlights

* Company made a debut into the face cleansing category of products with its new Palmolive range of face foams, masques and scrubs.

* Launched innovative products such as the Colgate Gum Expert toothpaste with curcumin extracts from turmeric, and the Colgate RecyClean, a first-of-its-kind toothbrush with bristles that are plant derived, BPA-free and with handles made from 100% recycled plastic.

* Partnership with NGO, Mission Smile, focused on performing cleft therapies for children from low income families across the country.

Valuation

Company has delivered a resilient performance amid unprecedented market conditions. It is well positioned to meet the challenges by virtue of its strong financial position and continued focus on key strategic priorities. Innovation related investments, digital transformation and brand penetration will drive revenue growth in future. Urban demand is expected to be intact with waning Omicron effect. The company aims at consumer traction in new launches with improved AD spends. The stock is currently trading at attractive valuations. With positive outlook, we upgrade our rating on the stock to BUY with a rolled forward TP of Rs. 1,690 based on 34x FY24E adj. EPS.

To Read Complete Report & Disclaimer Click Here

For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer 
SEBI Registration Number: INH200000345

Above views are of the author and not of the website kindly read disclaimer