Colgate Palmolive (2QFY15) : Inline nos. Maintain SELL :: HDFC Securities, PDF link

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Inline nos
Colgate’s 2QFY15 total income grew by 11.1% YoY to
~Rs 10bn. Impacted by weak macros, volume growth
continues to remain muted at ~6% (toothpaste
volumes grew ~7% YoY). Furthermore, market share
in the toothpaste category (though increased 80bps
YoY) was a tad lower (by 30bps) as compared to
1QFY15. However, the company continued to gain
share in the toothbrush category. EBITDA margin
expanded by 240bps YoY to 18.6% led by lower COGS
and A&P. Lower other income (-23.8% YoY) and
higher depreciation (+52.1% YoY) and tax outgo
(+164bps YoY) led to APAT growth of 18.3% YoY.
Despite P&G’s initial failure in the toothpaste
category, we expect the company to re-launch its
toothpaste with much more fervor. Though we
believe that P&G will take share from No. 2 player
and Colgate will retain its market share, however,
current valuations (Colgate trades at 30x FY17E EPS)
do not offer significant risk-reward. Retain SELL with
a TP of Rs 1,545 (27x FY17E)

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3009614