Prabhudas Lilladher's research report on Colgate Palmolive
CLGT Analyst meet had nothing new with focus on low growth oral care and lack of any concrete strategy sharing to grow Personal care. CLGT Mgt highlighted four growth pillars of the future growth strategy of the company as 1) Lead toothpaste volume growth 2) Drive science led premiumisation 3) Lead category growth in toothbrush & Devices and 4) Build personal care portfolio. CLGT is looking at 1) Ramping up innovations (Max Fresh Charcoal, Visible White in Oral Beauty category and Electric Toothbrushes 2) Increasing promotion intensity and 3) sustained investments to increase presence in personal care (Face, Hand and Body care). CLGT’s innovations in Oral care (Visible White, Power Toothbrush, Kids range) are all centric at premium end niche segments which won’t move growth needle for the company. CLGT will likely gain from any uptick in demand as naturals segment growth has now flattened (40bps share gain 10 2 years’ v/s 900bps in earlier 4 years). We believe CLGT needs to be much more aggressive in Personal care to accelerate growth.
Outlook
We estimate 8.1% Sales and 10.3% PAT CAGR over FY23-25 assuming 4.3% decline in FY23 EPS. Although CLGT’s growth is unexciting, favorable financial parameters (37.1x Sep’24 EPS, 2.2% Dividend yield, 90%+ payout and ~80% ROCE) limit downside. We value CLGT at 37x Sep’24 EPS and assign a Target of Rs 1639 (NO CHANGE). Retain HOLD.
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