Colgate Palmolive - Q1FY22 First Cut - ICICI Direct

(CMP - Rs. 1720, MCap - Rs. 46,807 crore)

Colgate's Q1FY22 numbers were in line with our estimates on both revenues & earnings front.

Q1FY22 Earnings Summary

- Revenue grew by 12% to Rs. 1166 crore (I-direct estimate: Rs. 1198.3 crore) on the back of low base quarter impacted by pandemic induced lockdown. The company saw 4.1% revenue decline in base quarter. Colgate has been least impacted during lockdowns mainly on account of higher trade & consumer inventory levels of oral care products. The company been focusing on natural products in both toothpaste & toothbrush category with the oral care market has been witnessing shift towards Ayurveda & Natural products. Its new product Vedshakti Mouth Spray, toothpaste for diabetics has gained traction during the quarter

- Gross margins expanded by 300 bps mainly on account of favourable sorbitol & calcium carbonate prices. The company has increased its advertisement spends by 280 bps during the quarter to support natural toothpaste products & new launches. Operating profit increased by 15.3% to Rs. 355.2 crore (I-direct estimate : Rs. 368.3 crore) with operating margin expansion of 87 bps to 30.5%

- Net profit witnessed a growth of 17.7% to Rs. 233.2 crore (I-direct estimate : Rs. 242.1 crore) aided by higher operating profit

Colgate has been one of the few companies in FMCG space which has witnessed significant margin expansion in last two years. Moreover, the company has also been least impacted by Covid-19 disruptions. Though, we believe the presence in one saturated category has been drag on the revenue growth, the company has increased its focus on naturals products adapting the changing consumer preferences. Ayurveda, Naturals sub-category is now ~25% of the overall category & it is growing fastest within the oral care space. Further, the company has been launching new products in oral care & personal care segment to grow the sales. We believe Colgate would be able to grow at a moderate pace on sustainable basis in future. We are positive on the stock.

We will be coming out with detailed update soon.

Shares of COLGATE-PALMOLIVE (INDIA) LTD. was last trading in BSE at Rs. 1704.25 as compared to the previous close of Rs. 1709.1. The total number of shares traded during the day was 17404 in over 2262 trades.

The stock hit an intraday high of Rs. 1737.55 and intraday low of 1670.15. The net turnover during the day was Rs. 29461844.

Source : Equity Bulls

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