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BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING

COLGATE –PALMOLIVE (INDIA) LTD

Stock Coverage

Date 12th Dec 2018

BSE Code 500830

NSE Code COLPAL

Market Cap (Rs Cr) 34571.20

52 week High/Low 1285/1020.10

Industry Household &

Personal

Products

Face Value Rs 1/Share

Shares O/S (In No) 27.20 Cr

EPS * 27.40

Book Value* 56.95

P/E 46.39

P/B 22.32

*Note: On Standalone TTM basis

Shareholding Pattern as on Sept’ 2018

Research Analyst : Astha Jain

Colgate-Palmolive (India) Limited is India’s leading provider of scientifically proven oral care products with multiple benefits at various price points. The range includes toothpastes, toothpowder, toothbrushes and mouthwashes under the “Colgate” brand, as well as a specialized range of dental therapies under the banner of Colgate Oral Pharmaceuticals. The Company also provides a range of personal care products under the ‘Palmolive’ brand name.

Strong performance by key brands: In the ‘Naturals’ portfolio Colgate Swarna Vedshakti toothpaste continues to perform extremely well. Company recently launched the toothpaste in multiple pack sizes at different price points, nationally, where it continues to show a positive consumer confidence with strong repeat purchases. Also, company has relaunched India’s largest selling toothpaste and Colgate’s flagship brand - Colgate Strong Teeth, on an evocative platform of 'Daant Banaye Andar se Strong’ (Strengthens Teeth from within). The all new brand proposition unveiled through a nationwide 360° campaign across all consumer touch points.

Leadership position in toothpaste category: The Company continues its leadership positions in the Toothpaste category with a volume market share of 52.5% (Apr-Sep’18) and in the Toothbrush category with a volume market share of 44.2% (Apr-Sept’18).Understanding the shift of preferences that consumers are exhibiting towards e-commerce, company continue to invest ahead of the growth curve with the objective of being market leaders online as well in addition to traditional stores.

Healthy financial performance: In Q2FY19 . company has posted net sales of Rs. 1,160.6 crore for the second quarter of the financial year 2018-19, an increase of 8% over the same quarter of the previous year. Company has posted reported net profit after tax for the quarter at Rs. 196.4 crore, an increase of 11% over the previous year quarter .In H1 2018-19, company has posted net sales at Rs. 2,194.2 crore an increase of 7% (excluding GST impact) over the same period of the prior year. During same period reported net profit was at Rs. 385.9 crore, an increase of 23% over the prior period. Excluding the impact of exceptional items, the net profit increased by 14% over the same period.

Valuation

The company is currently trading at 46.39 of TTM eps of Rs 27.40 while it is trading at 44.51x of FY19E eps & 39.30x of FY20E eps. Going with the facts like increasing MSPs and normal monsoon, election year, freebies, loan waivers , we expect strong demand for products of company will emerge from rural areas. Along with it robust financial performance & strong future outlook is making a case for buy on the stock.Hence ,we are positive on stock & recommending “Buy” with price target of Rs 1450 for long term horizon.

www.hemsecurities.com

For Private Circulation Only HEM RESEARCH

BUY CMP 1271.00 TARGET 1450.00 LONG TERM INVESTMENT

Promoter51%

FII 13%

Others36%

COLGATE-PALMOLIVE (INDIA) LTD



From a modest start in 1937, Colgate-Palmolive (India) today has one of the widest distribution networks in India - a logistical marvel that makes Colgate available in almost 5.8 + million retail outlets across the country. The Company has grown to a Rs. 4490 crore plus organization. The company leads the 7600 crore Indian toothpaste market by holding 53.4% of the value market share in 2017-18.

Products

Oral care-Under this segment the company offers product like toothpastes, toothbrush, tooth powder & tooth whitening products.

Personal care -In this segment it offer products skin care, hair care ,body wash ,& shaving creams

Naturals Portfolio of colgate includes Colgate Swarna Vedshakti, Colgate Cibaca Vedshakti, Colgate Active Salt, Colgate Active Salt Lemon, Colgate Active Salt Neem.

Colgate has emerged as the #1 ‘Most Trusted Brand’ in India across categories inThe Economic Times Brand Equity Most Trusted Brand Survey for the year 2017. This is the 7th consecutive year that Colgate has been voted as the #1 ‘Most Trusted Brand’. Colgate is the only brand to feature in the top three ranks from 2001-2017 since inception of the survey.

Colgate, in partnership with IDA, Sri Ramachandra University (SRU) and Rotary International District 3232, made a proud entry in the Asia Book of Records, for ‘Most People Brushing their Teeth together’. Aimed at educating people about oral hygiene and the right techniques for brushing, the event witnessed a total 23,615 people – including school children and adults – brushing their teeth in the right manner, at the same time and at the same venue (SRU grounds, Chennai), using Colgate Toothpaste and Colgate Toothbrushes.

For Private Circulation Only HEM RESEARCH

\

56.3

60.4 60.7

6059.5

60.4

62.9

61.5

62.6

64.2

52

54

56

58

60

62

64

66

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Gross Margin %

17.12

21.57

17.6116.58

15.… 15.09

14.04

15.02

14.50

16.08

0.00

5.00

10.00

15.00

20.00

25.00

0

100

200

300

400

500

600

700

800

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

PAT & Margin %

PAT MARGIN %




Strong growth strategy Company has plans to drive its sales and volume up, through increase in its margins, bringing down cost, continuing to invest behind advertising, .These factors will in turn drive operating profits of company. Company’s key growth drivers are innovation, engaging with consumers to build brands, winning on ground & strong professional partnerships. For many years, company have been engaging consumers with the Colgate Scholarship Offer on the packs of company’s flagship offering, Colgate Strong Teeth toothpaste. In last FY, company have strengthened this engagement by partnering with BYJU’s, the popular learning app. In addition to receiving a chance to win an education scholarship, consumers received a coupon code for a free one month subscription to BYJU’s course materials. During the same year, company also launched an innovative initiative to celebrate the legacy of tamil poet-Thiruvalluvar.Company introduced special-edition Colgate Active Salth toothpaste packs with Thirukkural inspired stories printed inside the carton.

Company expanded its toothbrush business by increasing its multipack going from three packs to six packs. The brush multipacks have done very well in the modern trade be it from internal shipment as well as market share. This is mainly due to drive engagement as well as making it much better than prior year on those special promotions. Company continue to drive its distribution number of brands in rural, it is 3X versus 2012 to 1047 and company have special plans this year to increase its direct coverage. The plans are in place to increase its direct coverage between 20% to 25%. It is expected that by Q3FY19, company would start to see some improvement to its infrastructure, and, it really emphasizes on strengthening the current coverage and adding to it by 20% to 25%.

For Private Circulation only HEM RESEARCH

48.8 49.452.2 53.3 52.7 54.5 56.1 57 57.4 55.6

53.7

25.1 24.622.8

22.6 23.323.5 22.8

21.3 19.6 19.117.6

11.912.2 12.9 13.7 14.8 14 13.4 13.4 13.9 15.315.5

0.4 0.6 1.3 2.8 6.70

10

20

30

40

50

60

70

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Toothpaste Volume Share

Colgate Competitor 1

Competitor 2 Competitor3

Colgate

33.4

38.4 3835.9

39.842.3 42.8

44.4

47.345.1

11.411.9

14.8

17.8 18.8 18.418.4

17.4 14.6 14.2

5.9 6.4 7.2 7.2 6.7 7.5 89.3 10.7 11

0

5

10

15

20

25

30

35

40

45

50

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Toothbrush Volume Share

Colgate Competitor 1 Competitor 2

Colgate 3.2 X




New Launch Company is focused on delivering insightdriven innovation that provides value-added new products across all price points. In F.Y. 2017-18, this innovation has led to the launch of the following products: Toothpaste category: Colgate Swarna Vedshakti: This premium toothpaste in the ‘Naturals’ category was launched in select markets and is now being rolled out more broadly across the country. Colgate Swarna Vedshakti blends the goodness of Indian natural ingredients of Aloe Vera, Clove, Honey, Tulsi, Neem and Amla with Colgate’s oral care expertise, and effectively delivers holistic oral care. Colgate MaxFresh with Cooling Crystals - New Xtra Fresh: In the freshness segment, company has re-launched Colgate MaxFresh with Cooling Crystals with a new formula powered with breakthrough cooling technology that provides more intense cooling and a super fresh experience. Toothbrush category: Colgate Neo: An aesthetically designed toothbrush, Colgate Neo is available in 6 exciting and differentiating handle bristle colour combinations. Its ultra soft bristles gently cleans teeth. With 3,626 high density bristles, Colgate Neo comes in premium packaging which stands out from other toothbrushes.


64

1

-3-5

-0.9

12

4 4

7

-10

-5

0

5

10

15

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18` Q4'18 Q1'19 Q2'19

VOLUME GROWTH ( %)

18.39

22.8421.6 20.65 19.87

27.73 27.33 28.17 27.04 28.22

0

5

10

15

20

25

30

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19

EBIDTA Margin (%)





P&L A/c

Rs Cr

Particulars FY16 FY17 FY18 FY19E FY20E

Net Sales 3868.19 3981.82 4187.98 4606.78 5067.46 Growth ( %) --- 2.94 5.18 10.00 10.00 Expenditure 2929.67 3038.27 3075.61 3339.91 3648.57 EBIDTA 938.52 943.55 1112.37 1266.87 1418.89 Growth (%) --- 0.54 17.89 13.89 12.00 EBIDTA Margin (%)

24.26 23.70 26.56 27.50 28.00

Other Income 39.51 41.12 38.82 42.70 46.97 Depreciation 111.41 133.24 156.51 172.16 189.38 EBIT 866.62 851.43 994.68 1137.41 1276.48 EBIT Margin (%) 22.40 21.38 23.75 24.69 25.19 Interest 0.00 0.00 0.00 0.00 0.00 Exceptional Item (31.34) 0.00 (11.65) 0.00 0.00 PBT 835.28 851.43 983.03 1137.41 1276.48 Tax 254.11 274.00 309.66 363.97 408.47 PAT 581.17 577.43 673.37 773.44 868.01 Growth (%) --- (0.64) 16.62 14.86 12.236 NPM (%) 15.02 14.50 16.08 16.79 17.13

Ratios


EPS 2137 21.23 24.76 28.55 32.34

ROCE(%) 84.05 66.84 65.24 69.29 69.00

ROE(%) 56.37 45.33 44.17 47.12 46.92

Book Value 37.91 46.83 56.05 60.59 68.93

Debt/Equity 0.00 0.00 0.00 0.00 0.00




Balance Sheet

Rs Cr


Sh Capital 27.20 27.20 27.20 27.20 27.20

Res & Surplus 992.44 1240.99 1491.50 1615.05 1841.66

Sh App/Warrants 11.40 5.61 5.91 5.91 5.91

Minority Interest 0.00 0.00 0.00 0.00 0.00

Total Debt(Long Term+Short Term Borrowings)

0.00 0.00 0.00 0.00 0.00

Other Long Term Liab & Provision

417.63 689.46 1372.89 1470.20 1606.02

Net Deferred Tax Liability

9.67 27.47 35.52 35.52 35.52

Sources Of Fund 1458.34 1990.73 2933.02 3153.88 3516.31

Net Fixed Assets 1086.51 1274.69 1304.50 1307.33 1322.46

Non –Current Investments

31.16 31.16 31.16 31.16 31.16

Intangible Assets 0.00 0.00 0.00 0.00 0.00

Other Non –Current Assets

508.22 811.81 1519.44 1671.38 1901.42

Total Current Assets 1676.05 1773.30 1634.70 1798.17 1925.31

Current Liabilities & Provisions

1843.60 1900.23 1556.77 1654.16 1664.04

Net Current Assets (167.55) (126.93) 77.93 144.01 261.27

Uses Of Funds 1458.34 1990.73 2933.03 3153.88 3516.31





Standalone Quarterly Financial Highlights

Rs Cr Rs. Crore

Particulars Q2FY19 Q2FY18 Q1FY19 YoY% QoQ%

Total Income 1168.03 1084.88 1041.30 7.66 12.17

Total Expenses 838.46 784.03 759.71 6.94 10.37

Operating Profit 329.57 300.85 281.59 9.55 17.04

Net Profit 196.37 177.57 189.51 10.59 3.62

PBIDTM % 28.22 27.73 27.04 1.75 4.36

NPM % 16.81 16.37 18.20 2.71 (7.64)

EPS 7.22 6.53 6.97 10.59 3.59

Past Price Movement


13 20 27 3

September

10 17 24 1

October

8 15 22 29 5

November

12 19 26 3

December

10 17 24

-1.0

-0.5

0.0

0.5

1.0

1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

1000101010201030104010501060107010801090110011101120113011401150116011701180119012001210122012301240125012601270128012901300

33000

33500

34000

34500

35000

35500

36000

36500

37000

37500

38000

38500

39000

SENSEX (34,584.13, 35,207.33, 34,426.29, 35,150.01, +190.293), COLGATE PALMOLIV (1,201.85, 1,275.40, 1,193.50, 1,241.00, +39.0000)


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HEM SECURITIES LIMITED

MEMBER-BSE,CDSL,SEBI REGISTERED CATEGORY I MERCHANT BANKER

Sebi Registration No For Research Analyst: INH100002250

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GROUP COMPANIES

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HEM MULTI COMMODITIES PRIVATE LIMITED

MEMBER-NCDEX, MCX

HEM FINANCIAL SERVICES LIMITED

NBFC REGISTERED WITH RBI

Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are

not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an

offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advice. Reader is requested to rely on his

own decision and may take independent professional advice before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited,

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Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Disclosure of Interest Statement

1. Analyst Ownership of the stock No

2. Hem & its group companies ownership of stock Yes

3. Hem & its group companies director ownership of stock No

4. Broking relationship with the company covered No

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