Prabhudas Lilladher's research report on Colgate Palmolive
We are increasing EPS estimates by 2.5%/2.6% for FY23/FY24 due to strong margin strength in 4Q in inflationary environment and stable market share. CLGT has increased focus sustaining growth in the core segments (CDC and Toothbrushes) and incremental growth from innovations in Oral care, Body wash and Face cleansing products. Bounce back in family toothpaste segment and slight moderation in growth rates of Naturals segment augurs well for sustaining share in highly penetrated Toothpaste category. We expect rural demand to recover given favorable monsoons, higher crop prices, revival in housing and Govt capex which would boost demand. CLGT is focusing on accelerating growth led by 1) Ramping up innovations (Colgate Gum Expert, Colgate Visible White) 2) Increasing promotion intensity 3) Entry into premium face cleansing category (foams, scrubs and masques under Palmolive brand). We estimate 9.1% Sales and 7.9% PAT CAGR over FY22-24.
Outlook
Although CLGT’s growth is unexciting, favorable financial parameters (35x FY24PE,2.6% Dividend yield, 90%+ payout and 100% ROE) limit downside. We value CLGT at 37xFY24 EPS and assign a Target of Rs 1708 (earlier Rs 1664 on 37xFY24 EPS). Retain Accumulate
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