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November 1, 2012
Colgate
Performance Highlights
Quarterly results
(` cr) Revenue EBITDA OPM (%) PAT
Source: Company, Angel Research
NEUTRAL
CMP Target Price
Investment Period
2QFY13 774 157 20.3 145 2QFY12 657 112 17.1 100 % yoy 17.7 39.7 319bp 45.5 1QFY13 736 142 19.4 117 % qoq 5.1 10.3 96bp 23.6
`1,278 -
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code FMCG 17,381 (460) 0.3 1302/932 12,157 1 18,562 5,645 CLGT.BO CLGT@IN
For 2QFY2013, Colgate posted a healthy 45.5% yoy growth in its bottom-line to `145cr, with the volume growth coming in at a healthy ~10% yoy. The companys OPM rose by 319bp yoy to 20.3%. Key Highlights: During 2QFY2013, Colgate posted a 17.7% yoy growth in its net sales to `774cr. The companys volume market share (for January to September 2012) in the toothpaste category increased to 54.3% (vs 52.3% in January to September 2011). The companys volume market share in the toothbrush category rose to 39.0%. The OPM rose by 319bp yoy to 20.3%, due to lower advertisement expenditure (down 590bp yoy) and employee expenditure (down 219bp yoy) as a percentage of sales, even as other expenditure as a percentage of sales rose higher (by 316bp yoy). The net profit for the quarter rose by 45.5% yoy to `145cr, aided by a lower tax rate, which stood at 19.4% (vs 22.7% in 2QFY2012 and 28.0% in 1QFY2013) Outlook and valuation: During FY2012-14E, we expect Colgate to report a 15.2% CAGR in its top-line and ~13.8% CAGR in its earnings over FY2012-14E. At the current market price, the stock is trading at 30.1x FY2014E EPS. We see limited upside in the stock price from the current levels; hence, we maintain our Neutral rating on the stock. Key financials
Y/E March (` cr) Net sales % chg Net profit (Adj.) % chg EBITDA margin (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 51.0 6.0 21.2 21.9
3m 7.6 10.4
FY2011 2,286 16.5 403 (4.9) 22.5 29.6 43.2 45.3 113.4 135.8 7.4 33.0
FY2012 2,693 17.8 446 10.9 21.5 32.8 38.9 39.9 109.0 127.1 6.3 29.5
FY2013E 3,146 16.8 495 10.8 20.5 36.4 35.1 32.5 101.9 120.2 5.3 26.0
FY2014E 3,573 13.6 578 16.8 21.4 42.5 30.1 27.2 98.5 118.7 4.7 21.8
V Srinivasan
022 3935 7800 Ext: 6831
v.srinivasan@angelbroking.com
2QFY13 774 324 41.9 54 7.0 89 11.5 150 19.3 617 157 20.3 0 11 34 180 0 180 23.3 35 19.4 145 19 14 10.7 145
2QFY12 657 264 40.1 61 9.2 114 17.4 106 16.2 545 112 17.1 1 11 28 129 0 129 19.6 29 22.7 100 15 14 7.3 100
% yoy 17.7 22.8 (10.3) (22.2) 40.8 13.2 39.7 (100.0) 0.3 20.7 39.6 39.6 19.5 45.5
1QFY13 736 300 40.7 62 8.5 84 11.4 148 20.1 594 142 19.4 0 11 31 163 0 163 22.2 46 28.0 117 16 14
% qoq 5.1 8.0 2.8 (13.0) (17.2) 6.2 1.0 1.2 (3.7) 3.9 10.3 #DIV/0! 0.9 7.3 10.4 10.4
1HFY2013 1,510 624 41.3 117 7.7 173 11.4 297 19.7 1,210 300 19.8 0 21 65 343 0 343 22.7 81
1HFY2012 1,268 510 40.2 110 8.7 135 10.7 283 22.3 1,039 229 18.1 1 19 58 267 0 267 21.1 67 25.0 200 16 14 14.7 200
% chg 19.0 22.2 5.8 27.5 5.1 16.5 30.7 (100.0) 9.0 10.7 28.4 28.4 20.6 31.0
(30.7) 23.6
23.5 263 17 14
45.5 45.5
8.6 117
23.6 23.6
19.3 263
31.0 31.0
November 1, 2012
52.6
52.5
54
54.5
54.3
Toothpaste
Top-line (LHS)
yoygrowth (RHS)
1Q13
2Q13
40.0 (%) 30.0 20.0 10.0 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 20.3 13.4 21.4 19.1 17.1 19.3 22.3 19.4 20.3
66
OPM
Gross margin
PAT (LHS)
November 1, 2012
Investment rationale
Continues to maintain market leadership: Colgate has continued to maintain its market leadership in all categories of oral care such as tooth paste, tooth brush and mouth wash despite intensive competitive pressure. It in fact has gained market share from its rivals over the last one year. Strong innovation capabilities: Colgate has continuously demonstrated its innovation capability through launch of new products. It has launched premium products such as Colgate Max Fresh toothbrush and Colgate 360 Battery toothbrush to counter aggressive product launches and higher ad spend by HUL.
November 1, 2012
Source: Company
Company background
Colgate-Palmolive, a 51% subsidiary of Colgate Palmolive Company, USA, is a leading FMCG player in the Indian oral care market. The oral care segment contributes ~96% to the company's revenue, with the personal care and household care segment contributing the balance. The company, under the Palmolive brand name, is present in the personal care segment.
November 1, 2012
FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E 1,695 1,695 15.0 1,428 741 272 139 277 266 16.1 15.7 23 244 16.1 14.4 1 108 30.8 350 19.5 5 345 55 15.7 295 295 290 25.3 17.1 21.7 21.7 26.8 1,962 1,962 15.8 1,537 777 299 159 302 425 59.7 21.7 38 388 59.3 19.8 2 98 20.3 485 38.4 485 62 12.7 423 423 423 45.8 21.6 31.1 31.1 43.4 2,286 2,286 16.5 1,772 872 349 193 357 515 21.0 22.5 34 480 23.8 21.0 2 41 7.9 520 7.3 520 117 22.6 403 403 403 (4.9) 17.6 29.6 29.6 (4.9) 2,693 2,693 17.8 2,115 1,050 412 216 437 579 12.4 21.5 39 539 12.3 20.0 2 51 8.6 588 13.2 588 142 24.1 446 446 446 10.9 16.6 32.8 32.8 10.9 3,146 3,146 16.8 2,500 1,236 503 271 489 647 11.8 20.5 41 605 12.2 19.2 3 68 10.1 670 13.9 670 176 26.2 495 495 495 10.8 15.7 36.4 36.4 10.8 3,573 3,573 13.6 2,808 1,398 561 300 548 765 18.4 21.4 47 719 18.7 20.1 3 76 9.6 792 18.1 792 214 27.0 578 578 578 16.8 16.2 42.5 42.5 16.8
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with
November 1, 2012
Balance Sheet
Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Long term Provisions Other Long term liabilities Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Long term loans and advances Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets
previous year numbers
FY2009 FY2010 14 203 216 5 (18) 203 384 251 133 5 41 38 538 251 193 94 551 (14) 203 14 313 326 5 (18) 313 494 288 206 6 41 21 591 348 123 120 552 39 313
FY2011 14 370 384 0 (17) 27 1 395 553 325 228 8 27 39 18 696 395 72 229 622 74 395
FY2012 14 422 435 (12) 30 1 454 586 359 227 69 27 47 23 724 310 109 305 663 60 454
FY2013E FY2014E 14 521 535 (12) 30 1 554 699 400 299 14 27 47 40 965 537 120 308 839 126 554 14 625 639 (12) 30 1 657 777 447 330 16 27 47 40 1,091 622 120 350 894 197 657
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with
November 1, 2012
FY2009 345 23 35 (34) 55 (46) 268 9 34 43 0 0 238 (34) (204) 107 144 251
FY2010 485 38 (23) (24) 62 70 484 (111) 17 (93) 0 (0) 318 (24) (294) 96 251 348
FY2011 520 34 (7) (29) 117 36 437 (47) (18) (65) (5) 349 (29) (325) 48 348 395
FY2012 588 39 (81) (40) 142 8 373 (95) (8) (103) (0) 395 (40) (355) (85) 395 310
FY2013E 670 41 151 (50) 176 (2) 635 (58) (58) 395 (45) (350) 227 310 537
FY2014E 792 47 7 (57) 214 11 586 (79) (79) 474 (52) (422) 85 537 622
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with
November 1, 2012
Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Returns (%) RoCE Angel ROIC (Pre-tax) RoE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days)
previous year numbers
FY2009 58.9 55.5 80.4 1.2 10.1 70.3 84.2 21.7 21.7 23.0 15.0 15.9 142.2 153.3 4.3 18 2 85 (57)
FY2010 41.1 37.7 53.3 1.6 8.7 43.9 54.4 31.1 31.1 33.9 20.0 24.0 150.3 156.1 4.5 21 2 79 (57)
FY2011 43.2 39.8 45.3 1.7 7.4 35.3 42.9 29.6 29.6 32.1 22.0 28.2 135.8 113.4 4.4 25 12 94 (51)
FY2012 38.9 35.8 39.9 2.0 6.3 31.6 37.5 32.8 32.8 35.7 25.0 32.0 127.1 109.0 4.7 30 12 79 (34)
FY2013E 35.1 32.4 32.5 2.0 5.3 27.8 30.4 36.4 36.4 39.4 25.0 39.3 120.2 101.9 4.9 24 11 88 (48)
FY2014E 30.1 27.8 27.2 2.3 4.7 23.3 25.4 42.5 42.5 45.9 30.0 47.0 118.7 98.5 4.8 24 11 83 (43)
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with
November 1, 2012
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This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Colgate No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
November 1, 2012
10