Colgate Palmolive - March 2013 Results Preview - Motilal Oswal

- We expect sales growth of 15% YoY to INR7.88b; toothpaste volume growth is estimated at 8-9%.

- Convergence of urban and rural growth (rural was growing at higher rates earlier) indicates continued moderation in toothpaste volumes.

- During the quarter, Colgate launched its new offering in the gum-care segment - Colgate Pro Gum. Subsequently, GSK Consumer entered the specialty segment with its offering - Parodontax.

- We expect 180bp contraction in EBITDA margin at 22.4% on account of higher ad spends due to product launches, and sales promotion due to heightened competitive activity by other players.

- Higher tax rate at ~27% (up 240bp YoY) shall result in muted 5% increase in PAT to INR1.37b.

- The stock trades at 28.1x FY14E and 23.9x FY15E EPS. Neutral.

Source : Equity Bulls

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