Margins remain at elevated levels… - …content.icicidirect.com/mailimages/IDirect_Colgate_Q4FY16.pdfContinues to be market leader despite category disruption in toothpaste ... Colgate

May 25, 2016

ICICI Securities Ltd | Retail Equity Research

Result Update

Margins remain at elevated levels… • Colgate-Palmolive’s (CPIL) net sales grew by 6.8% YoY to | 1091.1

crore (I-direct estimate: | 1056.8 crore) on the back of 6% volume growth (including exports). Domestic volume growth stood at 4% in Q4FY16

• EBITDA margins contracted by 211 bps to 22% (I-direct estimate: 22.5%) largely due to steep increase in A&P spend by 306 bps as percentage of sales. Savings due to benign RM cost (down 32 bps as percentage of sales) & lower overheads (down 92 bps as percentage of sales) provided margin support

• Earnings declined 10.8% YoY to | 145.9 crore (I-direct estimate: | 158.2 crore) mainly due to higher tax rate & marginally lower EBITDA. Tax rate increased by 442 bps owing to phasing out of fiscal benefits in Himachal Pradesh

Continues to be market leader despite category disruption in toothpaste CPIL is the largest player in oral care in India with a market share (March 2016) of 55.7% in toothpaste & 46.2% in toothbrush category. Despite Procter & Gamble’s (P&G) re-entry into the toothpaste segment in India in June, 2013 (brand: Oral B), CPIL’s market share only strengthened. CPIL has increased its volume market share in toothpaste from 55% in June 2012 to 55.7% in March 2016. Similarly, the market share in toothbrush has also increased from 39% to 46.2% for the same period. FMCG player Patanjali’s entry has disrupted the toothpaste category, denting CPIL’s market share by ~150 bps from 57.2% in 2015. We believe that HUL, the second largest player in the toothpaste segment, has been more adversely affected than CPIL with market share loss of ~300 bps between 2013 & 2015. However, CPIL has an edge over its indigenous rival in the form a strong brand equity forged upon 80 years of presence in the Indian market along with a vast distribution network covering over 5 million outlets. We believe that CPIL’s renewed focus on the naturals segment under toothpaste, alongside its presence on the traditional segments (family, whitening, freshness, gum care, sensitive), would aid the company in fending off disruptive competition, given CPIL’s historical expertise in launching innovative product offerings in the market. Innovation at forefront Over the years, Colgate has built an extensive oral care portfolio through constant innovation, thereby offering products across the value pyramid and within each sub-category (sensitive toothpaste, gum care toothpaste, electric brush, kids brush etc.). Lately, it has been aggressive on extension of its premium portfolio to capture uptrading consumers. In FY16, it launched ‘Pain Out’, a product for express toothache relief, Palmolive hand wash as well as toothpastes (Total Charcoal Deep Clean, Active Salt Neem) and 360 range of toothbrushes (Charcoal Gold, Whole Mouth Clean, Visible White, Floss-Tip). Hence, with constant innovation and higher A&P spends, we believe Colgate would continue to remain the dominant player. It would be the largest beneficiary of increasing penetration levels in India (currently at ~80%). Hinting towards volume recovery; maintain BUY Led by CPIL’s constant effort to innovate its portfolio and drive premiumisation in oral care, we expect sales & earnings CAGR of 13.1% & 12.6% respectively during FY16-18E). Considering earnings visibility, sturdy return ratios, robust margins, we value CPIL at 35x its FY18E EPS of | 26.9 to arrive at a target price of | 940 per share and assign a BUY recommendation to the stock.

Colgate-Palmolive India (COLPAL) | 835 Rating matrix Rating : BuyTarget : | 940Target Period : 12 months

Potential Upside : 13% What’s changed?

Target Changed from | 1018 to | 940EPS FY17E Changed from | 25.2 to | 23.5EPS FY18E Changed from | 28.9 to | 26.9Rating Unchanged

Quarterly performance

Q4FY16 Q4FY15 YoY (%) Q3FY16 QoQ (%)Sales 1091.1 1022.0 6.8 1006.4 8.4EBITDA 241.2 247.5 -2.5 231.4 4.2EBITDA (%) 22.0 24.1 -211 bps 22.8 -85 bpsPAT 145.9 163.6 -10.8 159.4 -8.5

Key financials

| Crore FY15 FY16 FY17E FY18ENet Sales 3,954.8 4,132.2 4,654.2 5,285.2 EBITDA 822.2 929.3 1,028.9 1,169.9 PAT 559.0 576.5 639.0 730.5

EPS (|) 20.6 21.2 23.5 26.9 Valuation summary

FY15 FY16 FY17E FY18EP/E 40.6 39.4 35.5 31.1 Target P/E 45.7 44.3 40.0 35.0 Div. Yield 1.4 1.2 1.6 2.0 Mcap/Sales 5.7 5.5 4.9 4.3 RoNW (%) 72.6 58.7 51.6 51.4 RoCE (%) 93.4 77.6 73.6 73.5

Stock data Particular AmountMarket Capitalization (| Crore) 22,709.3Total Debt (FY16) (| Crore) 0.0Cash and Investments (FY16) (| Crore) 288.3EV (| Crore) 22,421.052 week H/L 1050 / 788Equity capital | 27.2 croreFace value | 1 Price performance

1M 3M 6M 12MColgate -1.7 2.3 -11.6 -16.5Dabur 6.6 19.8 2.9 6.7HUL -6.9 -1.7 1.4 -4.6Gillette 7.0 5.4 0.6 5.1 Research Analyst

Sanjay Manyal [email protected]

Parth Joshi

[email protected]

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis Q4FY16 Q4FY16E Q4FY15 YoY (%) Q3FY16 QoQ (%) Comments

Net Sales 1,091.1 1,056.8 1,022.0 6.8 1,006.4 8.4 Net sales increased 6.8% largely on the back of 6% volume growth (including exports). Phasing out of fiscal benefits in Baddi, Himachal Pradesh affected sales growth during the quarter

Operating Income 7.7 7.3 6.5 18.4 8.5 -9.2

Raw Material Expenses 395.6 381.5 373.8 5.8 358.4 10.4 Raw material cost to sales declined 32 bpsEmployee Expenses 74.7 62.3 66.3 12.6 72.3 3.3 Employee cost to sales increased 36 bpsSG&A Expenses 198.4 195.5 154.5 28.4 158.7 25.0 A&P spend increased significantly by 306 bps to 18.2% as percentage of sales

Other operating Expenses 189.0 184.9 186.4 1.4 194.1 -2.6 Overheads decreased by 92 bps as percentage of sales

EBITDA 241.2 239.8 247.5 -2.5 231.4 4.2EBITDA Margin (%) 22.0 22.5 24.1 -211 bps 22.8 -85 bps Operating margins contracted 211 bps largely due to higher A&PDepreciation 29.7 24.6 20.5 45.3 29.5 0.8Interest 0.0 0.0 0.0 NA 0.0 NAOther Income 11.4 8.3 7.1 59.5 10.6 7.0

PBT before exceptional 222.9 223.5 234.2 -4.8 212.6 4.8Exceptional Items 0.0 0.0 0.0 NA 0.0 NATax Outgo 77.0 65.3 70.5 9.1 53.2 44.8 Tax rate increased by 442 bps owing to phasing out of tax benefits in Baddi

PAT 145.9 158.2 163.6 -10.8 159.4 -8.5 PAT declined 10.8% on the back of lower EBITDA & higher tax rate

Key Metrics YoY growth (%)Volume Growth overall 6.0 NA NA NA 1.0 500 bpsVolume Growth (Toothpastes) 4.0 5.0 5.0 -100 bps NA NA We believe higher promotinal spend aided domestic volume growthVolume Mkt Share (Toothpaste) 55.7 NA 58.0 -230 bps NA NAVolume Mkt Share (Toothbrush) 46.2 NA 42.0 420 bps NA NA

Source: Company, ICICIdirect.com Research Change in estimates

(| Crore) Old New % Change Old New % Change Comments

Sales 4,654.2 4,654.2 0.0 5285.2 5285.2 0.0 We maintain our sales estimatesEBITDA 1,070.4 1,028.9 -3.9 1211.7 1169.9 -3.5EBITDA Margin (%) 22.8 21.9 -89 bps 22.8 22.0 -79 bps We have revised our margin estimates downwards as we believe that Colgate would

be stepping on the A&P cost with the launch of innovative products in the 'naturals' segment to counter Patanjali, which also has been aggressive on the promotions front in recent times

PAT 685.3 639.0 -6.8 785.7 730.5 -7.0 We have increased our tax rate estimates upwardsEPS (|) 25.2 23.5 -6.8 28.9 26.9 -7.0

FY17E FY18E

Source: Company, ICICIdirect.com Research Assumptions

CommentsFY14 FY15 FY16E FY17E FY18E FY16E FY17E FY18E

Toothpaste Vol. Growth(%) 9.4 6.5 5.5 6.0 6.0 5.5 6.0 6.0Toothpaste Value Growth(%) 14.0 10.5 7.8 11.3 12.4 7.8 11.3 12.4Toothbrush Vol. Growth(%) 19.5 17.5 15.0 14.0 15.0 15.0 14.0 15.0Toothbrush Value Growth(%) 29.1 22.3 17.2 17.9 19.1 17.2 18.6 19.6Raw Material/Sales % 39.6 37.1 36.2 36.8 36.9 36.1 36.8 36.9Marketing Exp./Sales % 19.4 18.1 17.5 17.8 17.7 17.6 17.5 17.5 We expect A&P spend to remain at elevated levels in

near term

EarlierCurrent

Source: Company, ICICIdirect.com Research


Company Analysis Sustained market share to keep revenue growth at 13.1% CAGR

CPIL has successfully maintained its market leadership in the oral care segment with 57.2% share by volume (2015), YoY increase of 40 bps, in the toothpaste category and 44.5% volume share (2015), YoY increase of 170 bps, in the toothbrush category. The nearest competitors in the toothpaste and toothbrush categories are at less than half the share of CPIL with 19.8% (2015) and 17.8% (2015) share by volume, respectively. With the ability to maintain the premium in its market share and comprehensive oral care portfolio, CPIL registered strong revenue growth of 15.1% CAGR (FY08-15). However, due to expiry of fiscal benefits at its Baddi facility, CPIL witnessed tepid sales growth of 4.5% YoY in FY16. Going ahead, we believe that led by CPIL’s strong brand equity it would continue to maintain its dominance in the segment and further boost its revenue growth through increasing presence in rural India. Hence, we expect revenue CAGR of 13.1% in FY16-18E led by a mix of volume & realisation growth. Exhibit 1: Revenue trend (| crore)

1695 1962 2221 2693 3084 3545 3955 4132 4654 5285

15.0 15.813.2

21.3

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Exhibit 2: CPIL market share only strengthens over the years

54.6 54.5

57.8 57.9 57.6 57.3

55.757.6

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565655.955.439.3

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Toothpastes - LHS Toothbrush - RHS



Dominance in oral care continues with sustained market leadership Led by the dominance of CPIL in toothpastes with a presence across premium, popular and mass categories and having SKUs across variants (regular, sensitive, herbal, whitening, gum care, freshness), CPIL’s market share in toothpaste has strengthened from 48.8% in CY07 to 57.2% in CY15. Aided by the strengthening market share, toothpaste revenues (~75% of CPIL’s revenues) and increasing penetration revenues from the segment have grown at a CAGR of 15.5% in FY08-15. Going ahead, we believe that with toothpaste per capita consumption expected to grow at 6.5% CAGR in FY14-23E to ~240 gm by FY23E and Colgate’s ability to maintain its market leadership through increasing innovation (Total Charcoal Deep Clean, Colgate Active Salt Neem toothpaste launched in FY16) and distribution, CPIL’s toothpaste volume CAGR would remain at ~5.8% in FY15-18E. Further, with new launches both in the premium and economy segments maintaining their pace, we expect CPIL to post segment revenue growth of 10.5% CAGR in FY15-18E.

Exhibit 3: Toothpaste revenue to grow at 10.5% CAGR

1492 1747 19782414

28523250

35923874

43114844

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Source: Company, ICICIdirect.com, Research

Exhibit 4: Volume growth to remain at ~5.8%

12.0 12.014.0

9.46.5 5.5 6.0 6.0

17.013.2

22.118.2

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Volume Growth Value Growth


Strengthening presence in toothbrush to sustain growth at 18.4% CAGR (FY15-18E) CPIL’s undeterred market share at 44.5% (CY15) in the toothbrush segment (~11% of revenues) has been led by strong volume CAGR (FY08-15) of 20.4% with segmental revenues growing at 21.1% CAGR (FY08-15). The company’s brand strength has enabled it to grab market share of unbranded players. Further, CPIL’s nearest competitor, P&G, with brand Oral-B, continues to maintain a distant No.2 position in the segment with 15.7% volume share in the segment. We believe that with the upgrading consumer needs in rural markets and uptrading demand by urban consumer, CPIL’s revenues from the toothbrush segment would continue to grow at 18.4% CAGR (FY15-18E) led by healthy volume CAGR of ~14.7%. We expect CPIL’s strong brand equity to aid in further strengthening the market share for the company in the toothbrush segment.

Exhibit 5: Toothbrush revenue growth to remain strong at 18.4% CAGR…

200 213 247320

391504

617723

8571025

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Exhibit 6: …led by volume CAGR of ~14.7%

14.9

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22.2 22.317.2 18.6 19.6

26.0

19.0 19.5 17.515.0 14.015.6

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Increasing penetration, per capita consumption to aid growth The penetration of toothpaste in India is ~80%, with ~25 crore of the population still using conventional methods of brushing. Though urban penetration is higher at 92.3% (2014), rural penetration lags behind at 74.1% (2014). The rural population accounts for ~35% toothpaste revenues for CPIL. It has been constantly increasing reach in rural areas by various initiatives like ‘Rural vans’ (1031 Colgate Rural vans in 2015 vs. 951 in 2014 and 340 in 2012). Hence, we believe there is a huge untapped opportunity for CPIL to increase its reach and volumes being the market leader of the segment. Further, the overall per capita consumption of toothpaste in India is significantly lower at 179 gm (March 2016) compared to other developing nations, China at 237 gm, Philippines at 352 gm and Brazil at 692 gm, providing enough room for CPIL to maintain its volume growth. We believe increase in volume growth & per capita consumption would come through increasing awareness on oral hygiene, change in consumer habits (brushing twice daily) and increasing penetration, aiding the company to maintain volume and value growth.

Margins likely to remain under check

EBITDA margins have improved significantly from 15.4% in FY08 to 20.6% in FY15 led by gross margin expansion and increasing contribution of premium products in revenues. Led by the company’s strong brand equity, CPIL enjoys strong pricing power in the oral care industry enabling it to easily pass on higher raw material cost through increasing prices without impacting its volume growth and concurrently expanding its gross margins. Hence, higher gross margins have enabled the company to expand its EBITDA margins. Since Q1FY14, however, CPIL’s margins witnessed moderation following the increased competitive action in the oral care industry and slowing urban consumption demand (moderating the rate of premiumisation in the segment). The increased competitive activity (HUL’s aggressiveness and P&G’s re-entry) pulled up the marketing & other expenditure (includes sales promotion expenses) of CPIL, thereby moderating its margins to 18.6% in FY14. With declining raw material costs and judicious A&P spend by CPIL, operating margins came in at 22.3% in FY16. However, we believe that though consumption demand would revive along with improving sales mix for CPIL (driving premiumisation), marketing spend is expected to remain at elevated levels, courtesy new launches and intense rivalry. EBITDA margins are likely to be capped at 22% by FY18E. Exhibit 7: EBITDA margin trend (%)

260 424 449 579 657 664 822

929 10291170

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21.620.2

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Exhibit 8: Marketing expenses expected to remain high

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Exhibit 9: RM cost to sales ratio to remain low at ~37% until FY18E

43.7

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Brand strength to aid in fighting competition

CPIL’s brand strength has aided in keeping competition away and maintaining its strong dominance in toothpaste and toothbrush. However, since H1FY14 (re-entry of P&G & expanding portfolio by Dabur, GSK Consumer, HUL), competition has been getting aggressive targeting huge untapped opportunity of segment. CPIL increased A&P expense by~30% YoY pressurising margins (declined from 21% in FY13 to 18% in FY14). Though margins have been stressed, CPIL’s market share has further strengthened led by CPIL’s high brand equity aiding in keeping competition at bay. CPIL reduced its A&P spend in FY15 while still gaining market share. FMCG player Patanjali’s entry has disrupted the toothpaste category, denting CPIL’s market share by ~150 bps from 57.2% in 2015. We believe that HUL, the second largest player in the toothpaste segment, has been more adversely affected than CPIL with market share loss of ~300 bps between 2013 & 2015. However, CPIL has an edge over its indigenous rival in the form a strong brand equity forged upon 80 years of presence in the Indian market along with a vast distribution network covering over 5 million outlets. We believe that CPIL’s renewed focus on the naturals segment under toothpaste, alongside its presence on the traditional segments (family, whitening, freshness, gum care, sensitive), would aid the company in fending off disruptive competition, given CPIL’s historical expertise in launching innovative product offerings in the market. Higher taxes to limit PAT growth We believe that PAT growth is likely to moderate to 12.6% CAGR (FY16-18E) against 16.5% CAGR (FY08-13). The moderation in earnings growth would be led by higher tax incidence on CPIL’s Baddi plant (Himachal Pradesh). CPIL’s Baddi plant was under 100% tax exemption until March, 2010 and enjoyed ~30% tax exemption until April 2015, after which it enjoyed no further exemptions. We estimate the effective tax rate for CPIL will increase gradually (25.8% in FY14, 30.4% in FY16 and 33% in FY18E), keeping earnings growth of CPIL under check.


Exhibit 10: PAT growth to moderate following higher tax incidence

423.3 405.2 446.5 496.8 539.9 559.0 576.5 639.0 730.5

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High dividend payout, strong return ratios Return ratios for CPIL have remained on a higher trajectory of ~100% since FY08 following the capital reduction by the company in FY08 and reducing the face value to | 1/share from | 10/share. This improved the RoE from 57.1% in FY07 to 142.8% in FY08. The company incurred a capex of | 400 crore in FY15 for its toothbrush facility in Sri City Andhra Pradesh. CPIL has further capex plan of ~| 400 crore in FY17E. Given these spends towards increasing its own capacity, return ratios of CPIL are expected to moderate in next two years. However, we expect the company to be able to increase its dividend payout to ~63% in FY18E.

Exhibit 11: Return ratios to witness downtrend in near term

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Exhibit 12: Dividend payout to reach ~63% by FY18E

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Outlook & valuation With Colgate’s strengthening presence in toothpastes in spite of fierce competition in the segment, we remain positive on the long term growth driven by increasing per-capita consumption and premiumisation in the segment. The company’s unmatched product portfolio would continue to maintain its dominance in the oral care segment. Though there are few near term concerns for margins given the increased competitive intensity in the segment and expired excise benefits, we believe CPIL’s high focus on innovation and strengthening market share would continue to yield positive long term returns for the company. The stock is currently trading at 31x its FY18E EPS of | 26.9. Considering the lead in market share of CPIL over its rivals, strong brand equity, ability to drive innovation as well as increasing premiumisation with gradual urban recovery, robust margins, sturdy return ratios & stable earnings visibility, we value CPIL at 35x its FY18E price to earnings. Hence, we arrive at a target price of | 940 per share and assign a BUY recommendation to the stock. Exhibit 13: Valuations

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%)

FY15 3954.8 11.6 20.6 3.5 40.6 27.2 72.6 93.4FY16 4132.2 4.5 21.2 3.1 39.4 24.1 58.7 77.6FY17E 4654.2 12.6 23.5 10.8 35.5 21.8 51.6 73.6FY18E 5285.2 13.6 26.9 14.3 31.1 19.1 51.4 73.5



Company snapshot

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Target Price : | 940

Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event

Jul-09Rise in share price aided by a special dividend of | 8/share and the increasing attractiveness of the defensives (FMCG Index) following the economic downturn

Nov-09 Second interim dividend of | 7/share taking the total dividend in H1FY10 to | 15/share May-10 Did not pay any final dividend keeping the dividend per share for FY10 restricted at | 20/shareJul-10 First interim dividend for FY11 of | 10/share Mar-11 Lacklustre performance of the stock following lower sales growth of ~13% and a decline in margins and net profit following increased competitionMay-12 Significant jump in performance with reported sales growth of ~21% YoY, volume growth of ~12% and improvement in margins. Also, with a run up in FMCG

stocks, following the robust growth and subdued performance in other sectors, the stock price witnessed significant gainsJan-13 Stock gains significantly mirroring the FMCG Index led by the preference of defensives with strong market leadership in a weak economic scenarioJun-13 Re-entry of P&G in oral care market in the country increased pressure on the stock considering the concerns of increasing competition from a fierce player. Also,

following the entry, Colgate's marketing expenses were expected to increase, pressurising margins

Nov-13Concerns on subdued FMCG volume growth with softening consumer demand impacted the performance of the complete FMCG Index also impacting the stock performance

Apr-15 Announces voluntary retirement scheme at toothpowder manufacturing plant in WalujSep-15 Announces bonus issue in the ratio 1:1


Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Colgate-Palmolive Co 31-Mar-16 51.00 138.7 0.02 Life Insurance Corporation of India 31-Mar-16 4.73 12.9 3.73 ARISAIG Partners (Asia) Pte. Ltd. 31-Mar-16 3.38 9.2 -0.44 Vontobel Asset Management, Inc. 31-Mar-16 1.69 4.6 -0.75 The Vanguard Group, Inc. 30-Apr-16 0.68 1.8 0.06 Fidelity Management & Research Company 31-Mar-16 0.64 1.7 -0.27 GMO LLC 30-Nov-15 0.52 1.4 -0.38 Columbia Wanger Asset Management, LLC 31-Mar-16 0.51 1.4 -0.39 UTI Asset Management Co. Ltd. 31-Mar-16 0.45 1.2 0.410 Kotak Mahindra Asset Management Company Ltd. 31-Mar-16 0.40 1.1 0.0

(in %) Mar-15 Jun-15 Sep-15 Dec-15 Mar-16Promoter 51.0 51.0 51.0 51.0 51.0FII 20.8 17.3 17.6 18.3 16.2DII 5.0 8.5 5.9 6.0 8.0Others 23.2 23.2 25.4 24.7 24.8

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value Shares Investor name Value SharesLife Insurance Corporation of India 46.58m 3.71m Vontobel Asset Management, Inc. -9.14m -0.73mIDFC Asset Management Company Private Limited 8.01m 0.64m ARISAIG Partners (Asia) Pte. Ltd. -5.35m -0.43mStewart Investors 7.24m 0.49m GMO LLC -4.64m -0.32mUTI Asset Management Co. Ltd. 4.53m 0.36m Columbia Wanger Asset Management, LLC -3.38m -0.27mICICI Prudential Asset Management Co. Ltd. 4.17m 0.33m Fidelity Management & Research Company -2.13m -0.17m

Buys Sells

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Financial summary Profit and loss statement | Crore (Year-end March) FY15 FY16 FY17E FY18ETotal Operating Income 3981.9 4162.3 4688.1 5322.5Growth (%) 11.3 4.5 12.6 13.5Raw Material Expenses 1,467.7 1,495.3 1,712.8 1,950.3Employee Expenses 258.9 269.8 297.9 338.3Marketing Expenses 714.2 724.2 828.4 935.5Administrative Expenses 237.8 0.0 181.5 206.1Other expenses 481.1 743.7 638.6 722.5Total Operating Expenditure 3,159.7 3,233.0 3,659.2 4,152.7EBITDA 822.2 929.3 1,028.9 1,169.9Growth (%) 23.8 13.0 10.7 13.7Depreciation 75.0 111.4 119.6 127.2Interest 0.0 0.0 0.0 0.0Other Income 33.2 41.6 44.5 47.6PBT 780.4 859.5 953.7 1,090.3Exceptional items 0.0 -31.3 0.0 0.0Total Tap 221.4 251.6 314.7 359.8PAT 559.0 576.5 639.0 730.5Growth (%) 3.5 3.1 10.8 14.3EPS (|) 20.6 21.2 23.5 26.9


Cash flow statement | Crore (Year-end March) FY15 FY16 FY17E FY18EProfit/Loss after Tap 559.0 576.5 639.0 730.5Add: Depreciation 75.0 111.4 119.6 127.2Add: Interest 0.0 0.0 0.0 0.0(Inc)/dec in Current Assets -50.4 -50.8 -131.1 -112.6Inc/(dec) in Current Liabilities 3.3 -30.0 138.9 132.3CF from operating activities 586.9 607.1 766.4 877.3(Inc)/dec in Investments 7.0 0.0 0.0 0.0(Inc)/dec in Fixed Assets -300.4 -275.2 -400.0 -200.0Others 62.5 29.2 -21.0 3.3CF from investing activities -230.9 -245.9 -421.0 -196.7Issue/(Buy back) of Equity 0.0 13.6 0.0 0.0Inc/(dec) in loan funds 0.0 0.0 0.0 0.0Dividend paid & dividend tap -388.4 -322.3 -419.0 -547.9Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0Others -0.2 -18.6 0.0 0.0CF from financing activities -388.5 -327.4 -419.0 -547.9Net Cash flow -32.5 33.8 -73.6 132.6Opening Cash 287.0 254.4 288.3 214.7Closing Cash 254.4 288.3 214.7 347.3


Balance sheet | Crore FY15 FY16 FY17E FY18ELiabilitiesEquity Capital 13.6 27.2 27.2 27.2Reserve and Surplus 756.7 992.3 1,212.2 1,394.8Total Shareholders funds 770.3 1,019.5 1,239.4 1,422.0Total Debt 0.0 0.0 0.0 0.0Long Term Provisions 60.9 64.3 32.6 37.0Other Non-current Liabilities 4.1 23.4 23.4 23.4Total Liabilities 835.3 1,107.1 1,295.4 1,482.4AssetsGross Block 1,282.9 1,699.2 2,099.2 2,249.2Less: Acc Depreciation 501.3 612.7 732.3 859.5Net Block 781.6 1,086.5 1,366.9 1,389.7Capital WIP 141.2 0.0 0.0 50.0Deferred Tap Asset 0.0 0.0 0.0 0.0Non Current Investments 30.1 30.1 30.1 30.1LT Loans & Advances/Others 59.3 52.7 42.0 43.2Current AssetsInventory 252.2 292.7 344.3 391.0Debtors 69.6 101.5 127.5 144.8Cash 254.4 288.3 214.7 347.3Loans & Advances 110.0 87.5 140.3 188.2Other Current Assets 3.4 4.3 5.1 5.8Current LiabilitiesCreditors 514.4 551.9 637.6 724.0Provisions 66.3 46.4 57.4 65.2Other CL 285.9 238.2 280.5 318.6Net Current Assets -176.9 -62.2 -143.6 -30.6Total Assets 835.3 1,107.1 1,295.4 1,482.4


Key ratios (Year-end March) FY15 FY16 FY17E FY18EPer share data (|)EPS 20.6 21.2 23.5 26.9Cash EPS 23.3 25.3 27.9 31.5BV 28.3 37.5 45.6 52.3DPS 12.0 10.0 13.0 17.0Cash Per Share 9.4 10.6 7.9 12.8Operating Ratios (%)EBITDA Margin 20.6 22.3 21.9 22.0PBT / Net Sales 19.7 20.8 20.5 20.6PAT Margin 14.1 14.0 13.7 13.8Inventory days 23.3 25.9 27.0 27.0Debtor days 6.4 9.0 10.0 10.0Creditor days 47.5 48.8 50.0 50.0Return Ratios (%)RoE 72.6 58.7 51.6 51.4RoCE 93.4 77.6 73.6 73.5

Valuation Ratios (x)P/E 40.6 39.4 35.5 31.1EV / EBITDA 27.2 24.1 21.8 19.1EV / Net Sales 5.7 5.4 4.8 4.2Market Cap / Sales 5.7 5.5 4.9 4.3Price to Book Value 14.7 22.3 18.3 16.0Solvency RatiosDebt/EBITDA 0.0 0.0 0.0 0.0Debt / Equity 0.0 0.0 0.0 0.0Current Ratio 0.5 0.6 0.6 0.7Quick Ratio 0.2 0.2 0.3 0.3



ICICIdirect.com coverage universe (FMCG) CMP M Cap(|) TP(|) Rating (| Cr) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E

Colgate (COLPAL) 835 940 Buy 22,709 21.2 23.5 26.9 39.4 35.5 31.1 5.5 4.9 4.3 77.6 73.6 73.5 58.7 51.6 51.4Dabur India (DABIND) 289 304 Buy 51,268 7.1 7.9 8.6 40.5 36.5 33.6 5.7 5.2 4.7 31.1 29.4 28.4 30.2 27.7 26.1GSK CH (GLACON) 5,631 6,966 Buy 24,467 163.3 173.2 196.5 34.5 32.5 28.7 5.7 5.0 4.4 37.3 36.6 36.5 26.6 26.5 26.6Hindustan Unilever (HINLEV) 840 1,000 Buy 186,494 18.9 22.1 26.0 44.5 38.0 32.3 5.9 5.3 4.8 107.5 208.1 213.0 111.5 178.1 186.2ITC Limited (ITC) 356 403 Buy 279,117 12.2 14.1 15.0 29.1 25.3 23.7 7.7 6.7 6.1 43.0 47.8 48.1 29.9 33.7 34.4Jyothy Lab (JYOLAB) 290 300 Hold 5,272 9.0 9.9 11.2 32.3 29.4 25.9 3.4 3.0 2.7 19.2 17.9 19.5 15.7 15.4 16.7Marico (MARIN) 251 285 Buy 33,480 5.6 6.4 7.9 44.6 39.1 31.6 5.5 5.0 4.3 46.3 45.6 46.7 34.6 34.4 36.0Nestle (NESIND) 6,146 6,615 Buy 57,679 58.4 120.9 164.5 105.2 50.8 37.4 7.1 5.4 4.7 29.7 36.1 41.6 32.3 38.1 44.7Tata Global Bev (TATTEA) 120 115 Hold 6,642 5.0 6.5 7.2 23.8 18.4 16.6 0.8 0.8 0.7 7.3 8.3 8.6 5.8 7.0 7.5VST Industries (VSTIND) 1,668 1,931 Buy 2,651 99.2 115.8 128.9 16.8 14.4 12.9 3.0 2.8 2.5 59.7 65.0 67.7 41.3 45.2 47.0

Sector / CompanyRoE (%)EPS (|) P/E (x) Price/Sales (x) RoCE (%)



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Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected]


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Margins remain at elevated levels… - …content.icicidirect.com/mailimages/IDirect_Colgate_Q4FY16.pdfContinues to be market leader despite category disruption in toothpaste ... Colgate

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