Colgate Research Paper

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BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY

Equity Research Report On Colgate Palmolive India Limited

For Institutional Clients

Analyst:

ANKIT KHAITAN
akhaitan@hemonline.com

www.hemonline.com

BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY

Colgate Palmolive India Limited
Market Cap: 6205.35 Crore Outstanding Shares: 13.59 Crore Price as of 13 April: 456.30 Book Value Per Share: 12.61 th

14 April 2009

th

BUY
Industry: FMCG NSE Code: COLPAL Target Price: 570.00 Upside: 114.00

52 Week Range: 480.00 / 341.00 Face Value Per Share: 1.00

Beta: 0.51 BSE Code: 500830

COLGATE BUSINESS DESCRIPTION
COLGATE PALMOLIVE INDIA LIMITED IS ENGAGED IN ORAL CARE, PERSONAL CARE AND HOUSEHOLD BUSINESS. THE COMPANY HAS PRESENCE IN INDIAN ORAL CARE MARKET FOR MORE THAN 70 YEARS AND THE ORAL CARE SEGMENT ENJOY STRONG BRAND EQUITY FOR PRODUCTS LIKE TOOTHPASTE, TOOTHPOWDERS AND TOOTHBRUSHES UNDER THE BRAND ‘COLGATE’ AND PERSONAL CARE PRODUCTS UNDER THE BRAND ‘PALMOLIVE’.

STOCK PERFORMANCE
COLGATE SENSEX 1m 6.28% 25.25% 12m 14.86% -30.62%

GROWTH (%)
REVENUE PROFIT Last Qtr. Last Yr. 3 Yr. CAGR 1.25% 13.76% 15.05% 22.43% 58.87% 27.99%

Recommendation
With inflation at the lowest level, raw material prices cooling off and excise duty cut has help FMCG companies to maintain its margin. We are very positive on the long term business prospects of the company and its financial performance. At Current Market Price of INR 456.30 and with FY08E and FY09E EPS of INR 20.50 and 23.10, the stock is trading at a PE of 22.2x and 19.7x respectively. We reiterate “BUY” on the stock with target price of INR 570.00 with a medium term investment horizon.

EPS ANALYSIS

Highlights/Recent Updates
Prices rise in some products by 4 per cent Colgate Palmolive India Limited, a leader in the tooth paste segment, has increased the prices of some its product by around 4 per cent, where as other consumer goods makers such as Hindustan Unilever Limited and Procter and Gamble are cutting prices of their products. The company announced second interim dividend Colgate Palmolive India Limited has announced a second interim dividend for the FY 2008-09 of INR 6 per share on share of face value INR 1. This dividend is in addition to the first interim dividend declared in December 2008 of INR 9 per share. Reduction of Share Capital Colgate Palmolive India Limited has reduce the capital of the company by reducing the par value of shares from INR 10 to INR 1 though the number of shares will remain unchanged ~13.60 crore. The Share capital was reduced from INR 136 crore to INR 13.60 crore paying back INR 9 per share to each shareholder. This has enhanced the profitability ratio of the company.

DIVIDEND ANALYSIS

For Private Circulation Only

1

Hem Institutional Research Desk

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INDUSTRY SNAPSHOT
India is one of the fastest growing economies in the world. While we are moving towards becoming a services-led economy but still agriculture contributes around 17 per cent of the total GDP and employs 60 per cent of the population. India's FMCG Industry is the fourth largest sector in the economy and creates employment for more than three million people in downstream activities. It is one of the most important sectors for each and every economy. It plays a vital role being a necessity and inelastic product which touches every life in one or the other aspect. Its principal constituents are Household Care, Personal Care and Food & Beverages. The total FMCG market is in excess of INR 85,000 Crore. It is currently growing at double digit growth rate and is expected to maintain a high growth rate. FMCG Industry is characterized by a well established distribution network, low penetration levels, low operating cost, lower per capita consumption and intense competition between the organized and unorganized segments. The Indian FMCG industry is known for the presence of global...
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