Colgate Palmolive (India) - Q2FY21 First Cut - ICICI Securities

(CMP - Rs. 1424, MCap - Rs. 39,738 crore)

Colgate reported strong set of numbers with 5.3% revenue growth & 12.3% earnings increase.

Q2FY21 Earnings Summary

- Revenues increased by 5.3% to Rs. 1285.5 crore led by 7.1% domestic sales growth. All categories toothpaste, toothbrush & personal care segment witnessed healthy demand conditions. Colgate was least impacted from Covid induced lockdown with plants started operating as soon as April. During the quarter, the company launched variant of Colgate visible while toothpaste & new Colgate gentle line of toothbrush. Also, it has launched a Colgate Vedshakti Mouth spray during the quarter

- With the sharp decline in crude based commodity cost, the gross margins improved by 340 bps. Further, the company would have got the benefit of lower advertisement rates which resulted in 160 bps lower ad-spend to sales. Moreover, cost cutting measures resulted in overhead spends down by 120 bps to sales. All these factors resulted in operating margin expansion of 540 bps to 31.8%

- Net profit increased by 12.3% to Rs. 274.2 crore. However, tax rate in base quarter was 12.4% due to the adjustment in tax provisioning after the corporate tax cut by government. Excluding this one-time impact of lower tax in base quarter, net profit growth has been 32%. The company declared an dividend of Rs. 18/share

Colgate has been least impacted by disruptions due to Covid induced lockdown with mere 4% sales decline in Q1. Most of the lost sales in March/April has been recouped in last five months. Moreover, the company is net beneficiary of sharp decline in crude related commodity cost & lower advertisement rates across media platforms. We believe the company would continue to enjoy the benefit of lower commodity cost in medium term. Though, the oral care category is saturated, the company is trying to make inroads in naturals sub-categories with its two brands 'Colgate Vedshakti' & 'Colgate Swarnshakti'. The company has lost market share in last five years to Ayurveda based brands, however, It has been able to curb this fall in last 2-3 quarters with new natural products & sustained media spends.

We will be coming out with a detailed update post the conference call with the management.

Shares of COLGATE-PALMOLIVE (INDIA) LTD. was last trading in BSE at Rs.1425.35 as compared to the previous close of Rs. 1462.75. The total number of shares traded during the day was 68460 in over 5243 trades.

The stock hit an intraday high of Rs. 1479.3 and intraday low of 1407. The net turnover during the day was Rs. 98742348.

Source : Equity Bulls

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