Colgate Q4 Results Review - Strategy To Drive Category Growth; Execution Is Key: ICICI Direct

ICICI Direct Report

Colgate-Palmolive India Ltd. reported domestic sales growth of 5.4% in Q4. Overall sales were up 3.7% YoY led by pricing growth; volumes were flat.

Ebitda was at Rs 451.9 crore, up 5.2% YoY, with margins at 33.5%. Consequently, adjusted profit after tax was at Rs 317.6 crore (down 1.8% YoY.

Key triggers for future price performance:

• Rural household daily usage of toothpaste is close to ~45%, urban usage of toothpaste twice a day is only ~20%. Rising per capita consumption and driving premiumisation in oral care category is key to growth.

• Colgate has strong brand equity of ‘Palmolive’ brand. However, it has been unable to leverage this brand for brand extension in personal care categories over the years. It is now expanding this brand in body wash.

• Gross margin is expected to remain elevated at ~65% given the decline in crude-based commodity prices. The company would increase ad-spends to perk up volumes across segments.

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