colgate palmolive - visit note-oct-15-edel - myirisbreport.myiris.com/es1/colpalia_20151001.pdf ·...
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Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset. Edelweiss Securities Limited
We recently met Mr. Issam Bachaalani, Managing Director, Colgate Palmolive India (Colgate). According to Mr. Bachaalani, the India team has delivered insight‐driven innovation based growth and will sustain focus on innovation—regional as well as national. The oral care category is reviving and the company is outpacing market despite heightened competition. Its new launches—Colgate Active Salt Neem and Colgate Total Charcoal—are faring well. Moreover, its sensitive segment too is turning around. Colgate has launched hand wash under naturals & nourishing platform in foam formats (in August) which has received good response. With 60% urban salience, Colgate is well poised to ride revival in urban growth. Maintain ‘HOLD’.
Deepening reach to ride herbal wave
The herbal segment has been clocking robust growth, in which Colgate has small
presence via Active Salt Neem. The company believes the category holds humungous
growth potential and is, hence, gradually expanding the product’s distribution reach.
Oral care regaining mojo
The pace of decline in the toothpaste category is shrinking and, in fact, growth is now
picking up. YTD15, the category grew 1.5% with palpable decline in H1CY15; last 3
readings have been positive (H1CY15 toothpaste category grew flattish YoY). The
company has been able to sustainably enhance its market share (57.9% volume share
in toothpaste in Q1FY16) with incremental use of analytics, robust boost from
innovative offerings and a vibrant distribution network.
Outlook and valuations: Positives priced in; maintain ‘HOLD’
We believe P&G’s focus on profits in India and muted response to its toothpaste
launch augur well for Colgate. We expect the latter to potentially benefit from the
anticipated recovery in urban demand and its strong innovation pipeline. The stock is
currently trading at 39.4x FY16E and 35.1x FY17E. We maintain ‘HOLD/SP’.
VISIT NOTE
COLGATE PALMOLIVE INDIAMD meeting: Sharpening bite
EDELWEISS 4D RATINGS
Absolute Rating HOLD
Rating Relative to Sector Performer
Risk Rating Relative to Sector Medium
Sector Relative to Market Underweight
MARKET DATA (R: COLG.BO, B: CLGT IN)
CMP : INR 962
Target Price : INR 1,044
52‐week range (INR) : 1,099 / 837
Share in issue (mn) : 272.0
M cap (INR bn/USD mn) : 262 / 4,302
Avg. Daily Vol.BSE/NSE(‘000) : 409.1 SHARE HOLDING PATTERN (%)
Current Q4FY15 Q3FY15
Promoters *
51.0 51.0 51.0
MF's, FI's & BK’s 8.5 8.1 7.6
FII's 17.3 17.7 19.2
Others 23.2 23.2 22.2
* Promoters pledged shares (% of share in issue)
: NIL
PRICE PERFORMANCE (%)
Stock Nifty
EW Consumer Goods Index
1 month (3.3) (2.0) (3.1)
3 months (5.8) (5.7) (0.8)
12 months 13.1 (1.5) 1.1
Abneesh Roy +91 22 6620 3141
Pooja Lath +91 22 6620 3075
Tanmay Sharma +91 22 4040 7586
India Equity Research| Consumer Goods
October 01, 2015
Financials
Year to March FY14 FY15 FY16E FY17E
Revenues (INR mn) 35,788 39,819 43,211 49,841 Rev. growth (%) 13.1 11.3 8.5 15.3
EBITDA (INR mn) 6,640 8,222 9,310 11,232
Adjusted Profit (INR mn) 4,755 5,590 6,639 7,459
No. of Shares outstanding (mn) 272 272 272 272 Adjusted Diluted EPS (INR) 17.5 20.6 24.4 27.4
EPS growth (%) (4.3) 17.6 18.8 12.4
Diluted P/E (x) 55.0 46.8 39.4 35.1
EV/EBITDA (x) 39.0 31.5 27.6 22.6 ROAE (%) 87.3 81.6 76.9 69.6
Consumer Goods
2 Edelweiss Securities Limited
Meeting with Mr. Issam Bachaalani, MD| Key takeaways
Toothpaste category: Pace of decline in toothpaste category has been shrinking and, in fact,
growth is now picking up. YTD15, the category grew 1.5% with sharp decline in H1CY15; last
3 readings have been positive (H1CY15 toothpaste category posted flattish YoY growth).
Rural growth: Continues to grow ahead of urban areas.
Urban revival: Urban has 60% salience for Colgate. The company has been consistent in
developing both rural and urban approach. Hence, it is well poised to ride any revival in
urban growth.
Sensitive segment: It is also turning around.
Herbal segment: The segment has been growing robustly. Colgate has small presence in the
segment via its Active Salt Neem offering. The company is gradually expanding the product’s
reach. It perceives tremendous potential in the segment and intends to do lot more
innovation in this space.
Market share: Colgate clocked highest volume share of 57.7% YTD August. The company’s
strategy has been to build market share in a sustainable manner instead of a big jump.
New launches: All its new launches—Colgate Active Salt Neem and Colgate Total Charcoal—
are faring well. The India team has delivered growth based on insight driven innovation and
will continue to focus more on innovation, be it regional or national.
Setting up plants in excise free zones: Availability of labour, power, ease of doing business
etc., also matter when setting up a plant. Colgate does not set up a plant only because it is in
an excise free zone. Proximity to market also plays a vital role.
Distribution: Colgate is currently working on improving effectiveness of its distribution plans
done over last few years to analyse what has worked for the company and to evaluate new
opportunities.
Analytics: Colgate is aggressive in the use of analytics. All the plans and activations are
reviewed on monthly basis using analytics. It also measures impact of activations on sales to
strategise activations. Hand‐held devices have been given to sales force to tap analytics.
These devices communicate various information to the sales team. For instance, if a
particular store has not bought X items in the past few months, what has been fast moving
in the store, what needs to be sold to the store from the company’s perspective, etc. Hence,
the communication with stores is much more detailed and focused.
Colgate mandate: Mandate is to perform and deliver on every line on P&L. The target is to
achieve profitable and healthy market shares since that is what defines the health of the
business. This has been a consistent strategy across the world.
Promotional spending: Promotional spending has jumped and is likely to stay at elevated
levels. It is too difficult to pull back promotions now as the market is accustomed to using
saver packs, etc. Also, none of the players want to lose share. Colgate’s offers are now much
better and focused on premiumising the customer. The company has improved its entire go‐
to‐market strategy in terms of presentation of products.
Mr. Issam Bachaalani, Managing Director,
Colgate India
Colgate Palmolive India
3 Edelweiss Securities Limited
Margin: Improving margins and profitability on a steady basis is a key KPI for Colgate. A&P is
not the only factor determining margin expansion; the company also focuses on cost control
through its Funding the Growth programmes.
E commerce: Online is in a nascent stage in India now, though globally it is big. The channel
came in quickly and has grown rapidly and Colgate is evaluating e‐commerce seriously. The
company has a dedicated internal team to focus on its e‐commerce strategy.
Mouthwash: Once GDP revives, the oral care category is likely to recover and mouthwash
will also grow. Medicated offerings of mouthwash are growing strongly. Doctors are
supporting this growth by prescribing medicated segment. Pick up in medicated segment
has dented Colgate and J&J. Colgate is No. 2 in the mouthwash category and is clocking
steady growth.
Personal care: Colgate’s presence in the category is minuscule. The company has recently
launched hand wash under the naturals & nourishing platform in foam formats (in August; so far, response has been excellent) The product has recently been launched in
Mumbai and was first launched in South market. Brand equity of Palmolive is No.3. Colgate’s
focus in personal care is on modern trade and hence advertising is low.
Other highlights
Colgate launched Colgate Total Charcoal Deep Clean
Launched Colgate Total Charcoal Deep Clean toothpaste, which helps clean and protect
100% of mouth surface. This new innovation in the company's vast portfolio utilizes the
unique formula with activated charcoal.
The company has roped in bollywood actress Lara Dutta as brand ambassador of this
product.
The product is also present in other countries and has now been brought to India.
In FY15 and FY16, the company launched a host of new products to drive growth and
premiumisation including Colgate Active Salt Neem, Colgate Total Charcoal, Colgate
Visible White Plus Shine, Colgate Sensitive Pro‐Relief (CSPR) Enamel Repair, Colgate
Sugar Acid Neutralizer, Colgate Slimsoft Charcoal toothbrush and Colgate Zig Zag black
toothbrush.
We applaud Colgate’s innovations in the oral care category. The company has sustained
market share gains where other MNCs like Hindustan Unilever (HUL) have lost share
while P&G has failed to leave a mark with its entry in this space. A new launch arouses
huge interest among consumers and also has a positive rub off on adjacent brands.
The company is also driving premiumisation via these innovations, which are priced
higher than the base brand, Colgate Dental Cream (contribution from premium
products has increased from 15.9% in FY12 to 21.1% in FY15).
Colgate goes the herbal way with Colgate Active Salt Neem
Colgate has entered the herbal toothpaste category, currently dominated by Himalaya,
with Colgate Active Salt Neem.
The company already has Colgate Active Salt in this category, but it has now extended
the Active Salt franchise with launch of Active Salt Neem.
The product helps keep away pyorrhea and fights germs.
Consumer Goods
4 Edelweiss Securities Limited
We like the strategy of giving its product a herbal touch. Dabur Red Toothpaste has
done extremely well for Dabur and has been growing in double digits on its ayurvedic
proposition.
Neem in India has been associated with tooth cleansing for ages and a product with
neem will address this consumer segment.
The company has launched the product at INR50 for a 100gm pack (Colgate Dental
Cream is priced at INR42 for 100gm pack, while 100gm pack of Dabur Red is priced at
INR45).
Colgate has roped in bollywood actress Priyanka Chopra to promote the product.
Colgate India Q1FY16 result | Key details
Innovations continue at robust pace for Colgate. Recent innovations include:
1. Colgate Total Charcoal Deep Clean
2. Colgate Active Salt Neem
3. Colgate Zig Zag Black
4. Colgate Sensitive Pro‐Relief (CSPR) Enamel Repair
The board has approved issue of bonus shares in the ratio of 1:1.
Overall volume growth came in at 2% YoY.
Volume growth in toothpaste segment was slightly below 2% YoY, while in toothbrush
was close to 4%.
Rural growth continued to surpass urban growth, but this gap has narrowed as urban
has seen slight pick‐up. Rural continues to do well for the company.
Colgate remained focused on the sensitive segment and believes it has the right
product to fight competition in this category. However, promotions by GSK Consumer
are high.
Overall volume growth in toothpaste category (as per Nielsen) is flattish at 1.5% in CY
YTD Jul 2015. Toothpaste category saw volume decline of 2.3% YoY in Q1CY15, while
volume growth came at 2.7% in Q2CY15. The category is likely to pick up, but at a
gradual pace.
Colgate did advertise for its mouthwash in Q1FY16 and is keeping the momentum going
in the segment. The company maintained its YoY market share in this category,
Impact of phasing out of fiscal benefits during the quarter was 330bps, which was
lower due to efficiency but expected to increase to 500bps in ensuing quarters. This
will have an impact of 150‐200 bps on Gross Margins.
HUL and GSK Consumer have been active on promotions.
Consumer Goods
6 Edelweiss Securities Limited
Outlook and valuations: Positives largely factored in; maintain ‘HOLD’
We continue to like Colgate’s focus on innovation, market share gains, distribution
expansion and building brand equity. The company continues to dominate toothpaste and
toothbrush categories. Though we need to closely monitor near‐term demand for overall
category, in our view, the company is well equipped to maintain its stronghold in the
toothpaste market and grow ahead of category. Its market share has risen led by sustained
investment in A&P. However, phasing out of fiscal benefits and increased promotional
intensity will restrict Colgate’s overall growth.
Colgate issued bonus shares in the ratio of 1:1. Accordingly there is a change in outstanding
shares, EPS, stock price etc.
We expect it to potentially benefit from anticipated recovery in urban demand, huge scope
for increase in per capita consumption and a strong innovations pipeline. We maintain our
target P/E at 38x FY17E EPS with target price of INR1,042. We maintain ‘HOLD/SP’.
Table 1: Trends at a glance
Source: Edelweiss research
Overall
volume
growth
Toothpaste
volume
growth
Gross
margin
EBITDA
marginTax rate
Q1FY09 NA NA 57.0 16.2 21.3
Q2FY09 NA NA 56.2 12.4 11.9
Q3FY09 NA NA 56.1 17.8 15.3
Q4FY09 NA NA 56.0 17.8 13.7
Q1FY10 NA 14.0 57.8 25.3 17.8
Q2FY10 NA 18.0 57.4 19.5 19.4
Q3FY10 NA 15.0 58.9 23.7 13.6
Q4FY10 11.0 11.0 67.6 23.3 9.1
Q1FY11 13.0 14.0 64.2 29.1 22.3
Q2FY11 13.0 12.0 61.3 22.8 22.1
Q3FY11 12.0 13.0 62.5 16.1 27.4
Q4FY11 9.0 12.0 60.0 23.6 20.2
Q1FY12 12.0 14.0 60.8 21.5 27.3
Q2FY12 13.0 14.0 61.0 19.4 22.7
Q3FY12 14.0 15.0 61.5 21.6 22.2
Q4FY12 12.0 13.0 60.9 24.2 24.3
Q1FY13 11.0 12.0 60.4 21.5 28.0
Q2FY13 10.0 11.0 59.1 22.2 19.4
Q3FY13 9.0 7.5 60.1 19.1 26.1
Q4FY13 11.0 11.0 60.3 20.3 27.3
Q1FY14 11.0 11.0 61.8 19.2 24.0
Q2FY14 10.0 10.0 59.8 16.2 25.8
Q3FY14 10.0 11.0 60.9 16.9 27.0
Q4FY14 8.0 7.0 60.3 21.9 27.3
Q1FY15 5.0 4.0 62.4 20.2 26.5
Q2FY15 5.0 7.0 62.7 18.6 27.5
Q3FY15 4.0 5.0 63.5 19.5 28.9
Q4FY15 4.0 5.0 63.7 24.1 30.1
Q1FY16 2.0 2.0 63.5 20.0 30.3
Colgate Palmolive India
7 Edelweiss Securities Limited
Chart 1: Toothpaste volume growth
Chart 2: Gross margin
Chart 3: EBITDA margin
Source: Company, Edelweiss research
0.0
3.2
6.4
9.6
12.8
16.0
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
(%)
45.0
50.0
55.0
60.0
65.0
70.0
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
(%)
10.0
15.0
20.0
25.0
30.0
35.0
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
(%)
Consumer Goods
8 Edelweiss Securities Limited
Chart 4: Tax rate
Chart 5: Per capita consumption of toothpaste low in India
Chart 6: Rural penetration lower than urban—Driver of future growth
Source: Company, Edelweiss research
0.0
7.0
14.0
21.0
28.0
35.0
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
(%)
100
220
340
460
580
700
Brazil USA Philippines China India
(Gms/year)
72.8
91.2
74.1
92.3
50
60
70
80
90
100
rural urban
%
2013 2014
Colgate Palmolive India
9 Edelweiss Securities Limited
Chart 7: Toothpaste volume market share
Chart 8: Toothbrush volume market share
Chart 9: Average selling price in USD per kg of toothpaste
Source: Company, Edelweiss research
54.5 55.9 56.757.8
23.8 22.8 21.5
19.913.9 13.5 13.4
13.410
22
34
46
58
70
2012 2013 2014 YTD15 (till April)
Colgate Competitor 1 Competitor 2
39.841.6 42.4 42.1
18.8 18.4 18.3 18.3
6.7 7.4 7.9 8.8
5
14
23
33
42
51
2012 2013 2014 YTD15 (till April)
Colgate Competitor 1 Competitor 2
3x
2.2x
1.8x
x
4
8
11
15
18
22
USA Brazil China India
Average
selling price in USD
per kg of
toothpaste
Consumer Goods
10 Edelweiss Securities Limited
Chart 10: Average selling price in USD per toothbrush
Chart 11: 1 year forward PE band
Source: Company, Edelweiss research
13.5x
8.5x
3x
x
0.0
0.6
1.2
1.8
2.4
3.0
USA Brazil China India
Average
selling price in USD
per
toothbrush
300
480
660
840
1,020
1,200
Sep‐10
Mar‐11
Sep‐11
Mar‐12
Sep‐12
Mar‐13
Sep‐13
Mar‐14
Sep‐14
Mar‐15
Sep‐15
(INR)
25x
30x
35x
40x
45x
Colgate Palmolive India
11 Edelweiss Securities Limited
Company Description
Colgate is India’s biggest oral care products company with more than 98% of its sales
coming from this product category. The company has products across variants and price
points in toothpaste, white toothpowder and toothbrushes, and is the leader in each of
these categories.
Investment Theme
The company is market leader in oral care category with 56.7% market share in toothpaste
category and enjoys strong brand equity, built over the years through high investment on
creating consumer awareness and brand recall. Volume growth would also remain robust
riding rise in both penetration and per capita consumption. Also, new categories like
sensitive toothpaste and mouthwash will further enhance growth and premiumisation.
However, higher competition will induce Colgate to increase its brand spends, which could
cap its margins.
Key Risks
Risks arise from down trading by consumers due to slowdown in rural wage growth and
reduced MSP crop prices.
Continued depreciation of the INR could increase cost of imported chemicals.
Increase in competitive intensity from new entrants.
12 Edelweiss Securities Limited
Consumer Goods
Financial Statements
Income statement (INR mn)
Year to March FY14 FY15 FY16E FY17E
Net revenue 35,449 39,548 42,804 49,372
Other Operating Income 339 272 407 469
Total operating income 35,788 39,819 43,211 49,841
Materials costs 14,020 14,677 15,623 17,873
Gross profit 21,768 25,142 27,587 31,968
Employee costs 2,118 2,589 2,782 3,110
Other Expenses 6,123 7,188 7,362 8,294
Advertisement & sales costs 6,887 7,142 8,133 9,331
EBITDA 6,640 8,222 9,310 11,232
Depreciation & Amortization 508 750 800 860
EBIT 6,133 7,472 8,510 10,372
Add: Other income 503 332 364 597
Add: Exceptional items 644 ‐ 213 ‐
Profit Before Tax 7,280 7,804 9,088 10,970
Less: Provision for Tax 1,881 2,214 2,662 3,510
Reported Profit 5,399 5,590 6,426 7,459
Less: Exceptional Items (Net of 644 ‐ (213) ‐
Adjusted Profit 4,755 5,590 6,639 7,459
No. of Shares outstanding (mn) 272 272 272 272
Adjusted Basic EPS 17.5 20.6 24.4 27.4
No. of Diluted shares outstanding 272 272 272 272
Adjusted Diluted EPS 17.5 20.6 24.4 27.4
Adjusted Cash EPS 14.9 23.4 27.3 30.6
Dividend per share (DPS) 13.5 12.0 12.8 15.9
Dividend Payout Ratio (%) 79.6 69.5 69.0 69.0
Common size metrics
Year to March FY14 FY15 FY16E FY17E
Materials costs 39.2 36.9 36.2 35.9
Staff costs 5.9 6.5 6.4 6.2
Advertising & sales costs 19.2 17.9 18.8 18.7
Other expenses 17.1 18.1 17.0 16.6
EBITDA margins 18.6 20.6 21.5 22.5
EBIT margins 17.1 18.8 19.7 20.8
Net Profit margins 13.3 14.0 15.4 15.0
Growth ratios (%)
Year to March FY14 FY15 FY16E FY17E
Revenues 13.1 11.3 8.5 15.3
EBITDA 1.1 23.8 13.2 20.6
PBT 9.8 7.2 16.5 20.7
Adjusted Profit (4.3) 17.6 18.8 12.4
EPS (4.3) 17.6 18.8 12.4
Key Assumptions
Year to March FY14 FY15 FY16E FY17E
Macro
GDP(Y‐o‐Y %) 6.9 7.4 8.0 8.7
Inflation (Avg) 9.5 5.9 5.0 5.0
Repo rate (exit rate) 8.0 7.5 6.8 6.5
USD/INR (Avg) 60.5 61.1 64.5 65.0
Company
Volume growth 9.0 5.3 5.0 8.0
Pricing change 6.0 5.2 2.0 7.0
EBITDA margin assumptions
Chemicals 37.1 36.9 36.4 36.4
Tubes and Containers 20.5 22.6 21.9 21.9
Oils 11.1 9.5 13.0 13.0
Cartons 10.8 10.9 11.0 11.0
COGS as % of sales 39.2 36.9 36.2 35.9
Staff costs as % of sales 6.0 6.5 6.5 6.3
A&P as % of sales 19.2 17.9 18.8 18.7
Financial assumptions
Tax rate (%) 28.3 28.4 30.0 32.0
EBITDA margin 18.6 20.6 21.5 22.5
Capex (INR mn) 3,192 2,902 588 1,000
Debtor days 7 6 7 7
Inventory days 54 59 60 60
Payable days 126 126 128 128
Cash conversion cycle (days) (65) (61) (62) (62)
Depreciation as % of gross block 6.1 6.6 6.0 6.0
Dividend as % of net profit 68.0 58.4 58.0 58.0
Yield on cash 15.6 11.4 12.5 11.5
13 Edelweiss Securities Limited
Colgate Palmolive India
Peer comparison valuation
Market cap Diluted Price to Earnings Enterprise Value / EBITDA (X) Return on Average Equity
Name (USD mn) FY16E FY17E FY16E FY17E FY16E FY17E
Colgate 4,302 39.4 35.1 27.6 22.6 76.9 69.6
Asian Paints 12,351 44.4 34.9 27.9 21.9 34.1 36.2
Dabur 7,925 37.6 31.2 30.2 25.1 34.7 34.6
Emami 4,027 59.9 44.4 33.0 25.4 32.0 35.4
Godrej Consumer 6,330 36.0 29.3 25.8 21.4 25.4 26.0
Hindustan Unilever 31,032 38.9 33.9 26.3 22.8 106.2 108.6
Median ‐ 39.1 34.4 27.8 22.7 34.4 35.8
AVERAGE ‐ 42.7 34.8 28.5 23.2 51.6 51.8
Source: Edelweiss research
Cash flow metrics
Year to March FY14 FY15 FY16E FY17E
Operating cash flow 4,574 6,382 7,221 8,619
Investing cash flow (1,804) (2,716) (802) (1,000)
Financing cash flow (4,221) (3,848) (4,140) (5,148)
Net cash Flow (1,451) (183) 2,279 2,471
Capex (3,192) (2,902) (588) (1,000)
Dividend paid (4,296) (3,884) (4,140) (5,148)
Share issuance/(buyback) ‐ ‐ (136) ‐
Profitability and efficiency ratios
Year to March FY14 FY15 FY16E FY17E
Return on Average Equity (ROAE) 87.3 81.6 76.9 69.6
Pre‐tax Return on Capital 121.8 113.9 102.8 102.4
Inventory Days 9 7 6 7
Debtors Days 59 54 59 60
Payable Days 122 126 126 128
Cash Conversion Cycle (54) (65) (61) (62)
Current Ratio 0.9 0.9 1.1 1.3
Operating ratios
Year to March FY14 FY15 FY16E FY17E
Total Asset Turnover 6.3 5.4 4.7 4.4
Fixed Asset Turnover 8.6 6.0 5.5 6.2
Equity Turnover 6.6 5.8 5.0 4.7
Valuation parameters
Year to March FY14 FY15 FY16E FY17E
Adjusted Diluted EPS (INR) 17.5 20.6 24.4 27.4
Y‐o‐Y growth (%) (4.3) 17.6 18.8 12.4
Adjusted Cash EPS (INR) 14.9 23.4 27.3 30.6
Diluted Price to Earnings Ratio 55.0 46.8 39.4 35.1
Price to Book Ratio (P/B) (x) 43.6 33.9 27.4 22.0
Enterprise Value / Sales (x) 7.2 6.5 5.9 5.1
Enterprise Value / EBITDA (x) 39.0 31.5 27.6 22.6
Dividend Yield (%) 1.4 1.2 1.3 1.7
Balance sheet (INR mn)
As on 31st March FY14 FY15 FY16E FY17E
Share capital 136 136 272 272
Reserves & Surplus 5,863 7,567 9,290 11,601
Shareholders' funds 5,999 7,703 9,562 11,873
Long Term Liabilities & Provisions 510 609 609 609
Deferred Tax Liability (net) (178) 26 26 26
Sources of funds 6,331 8,338 10,196 12,507
Gross Block 9,927 12,829 13,829 14,829
Net Block 5,559 7,816 8,016 8,156
Capital work in progress 1,415 1,412 1,000 1,000
Total Fixed Assets 6,974 9,228 9,016 9,156
Non current investments 371 301 301 301
Cash and cash equivalents 2,854 2,615 4,893 7,364
Inventories 2,257 2,522 2,568 2,938
Sundry Debtors 547 696 777 896
Loans & Advances 1,643 1,585 1,585 1,585
Other Current Assets 110 71 71 71
Total Current Assets (ex cash) 4,558 4,875 5,002 5,491
Trade payable 4,980 5,144 5,479 6,268
Other Current Liabilities & Short 3,446 3,537 3,537 3,537
Total Current Liabilities & 8,426 8,681 9,016 9,805
Net Current Assets (ex cash) (3,868) (3,806) (4,014) (4,314)
Uses of funds 6,331 8,338 10,196 12,507
Book Value per share (INR) 22.1 28.3 35.2 43.7
Free cash flow (INR mn)
Year to March FY14 FY15 FY16E FY17E
Reported Profit 5,399 5,590 6,426 7,459
Add : Non cash charge (651) 542 1,003 1,459
Add: Depreciation 508 750 800 860
Others (1,158) (208) 204 600
Less: Changes in WC 174 (250) 209 300
Operating cash flow 4,574 6,382 7,221 8,619
Less: Capex 3,192 2,902 588 1,000
Free Cash Flow 1,382 3,480 6,632 7,619
14 Edelweiss Securities Limited
Consumer Goods
Top 10 holdings
Perc. Holding Perc. Holding
Arisaig Partners Asia Pte Ltd 3.53 Life Insurance Corp Of India 2.71
Oppenheimerfund 2.16 Virtus Investment Advisers Inc 1.19
Vontobel India Fund 1.14 Vontobel Asset Management Ag 0.96
Columbia Wanger Asset Management 0.87 Vanguard Group Inc 0.66
Wasatch Advisors Inc 0.36 Driehaus Capital Management Llc 0.35
*as per last available data
Insider Trades Reporting Data Acquired / Seller B/S Qty Traded
28 Apr 2015 Oppenheimer Funds, Inc. as F.I.I. Sell 77000.00
30 Jan 2015 Life Insurance Corporation of India Sell 2760843.00
*in last one year
Bulk Deals Data Acquired / Seller B/S Qty Traded Price
No Data Available
*in last one year
Additional Data
Directors Data M.V Deoras Chairman R.A. Shah Vice Chairman
P.K. Ghosh Deputy Chairman I. Bachaalani Managing Director
N. Ghate Whole‐time Director, Company Secretary V.S. Mehta Non‐executive Director
J.K. Setna Non‐executive Director Dr. I. Shahani Non‐executive Director
G. Nthunzi Whole‐time Director & CFO
Auditors ‐ Price Waterhouse ‐ Chartered Accountants
15 Edelweiss Securities Limited
Company Absolute
reco Relative
reco Relative
risk
Company Absolute
reco
Relative
reco
Relative
Risk
Asian Paints BUY SO M Bajaj Corp HOLD SP H
Colgate HOLD SP M Dabur BUY SO M
Emami BUY SO H GlaxoSmithKline Consumer
Healthcare
HOLD SP M
Godrej Consumer BUY SO H Hindustan Unilever HOLD SP L
ITC HOLD SU M Marico BUY SO M
Nestle Ltd REDUCE SU L Pidilite Industries BUY SO M
United Spirits BUY SO H
RATING & INTERPRETATION
ABSOLUTE RATING
Ratings Expected absolute returns over 12 months
Buy More than 15%
Hold Between 15% and - 5%
Reduce Less than -5%
RELATIVE RETURNS RATING
Ratings Criteria
Sector Outperformer (SO) Stock return > 1.25 x Sector return
Sector Performer (SP) Stock return > 0.75 x Sector return
Stock return < 1.25 x Sector return
Sector Underperformer (SU) Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe within the sector
RELATIVE RISK RATING
Ratings Criteria
Low (L) Bottom 1/3rd percentile in the sector
Medium (M) Middle 1/3rd percentile in the sector
High (H) Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Ratings Criteria
Overweight (OW) Sector return > 1.25 x Nifty return
Equalweight (EW) Sector return > 0.75 x Nifty return
Sector return < 1.25 x Nifty return
Underweight (UW) Sector return < 0.75 x Nifty return
16 Edelweiss Securities Limited
Consumer Goods
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.
Board: (91‐22) 4009 4400, Email: [email protected]
Nirav Sheth
Head Research
Coverage group(s) of stocks by primary analyst(s): Consumer Goods
Asian Paints, Bajaj Corp, Colgate, Dabur, Godrej Consumer , Emami, Hindustan Unilever, ITC, Marico, Nestle Ltd, Pidilite Industries, GlaxoSmithKline Consumer Healthcare, United Spirits
Distribution of Ratings / Market Cap
Edelweiss Research Coverage Universe
Rating Distribution* 155 45 8 208* stocks under review
Market Cap (INR) 151 54 3
Date Company Title Price (INR) Recos
Recent Research
01‐Oct‐15 PatanjaliAyurved
Waiting in the wings; Visit Note
Not Listed
30‐Sep‐15 Britannia Industries
MD meet takeaways: Reloading the growth punch; Visit Note
3,087 Not Rated
16‐Sep‐15 Dabur CEO meeting takeaways: Banking on health for future wealth; Visit Note
282 Buy
> 50bn Between 10bn and 50 bn < 10bn
Buy Hold Reduce Total
Rating Interpretation
Buy appreciate more than 15% over a 12‐month period
Hold appreciate up to 15% over a 12‐month period
Reduce depreciate more than 5% over a 12‐month period
Rating Expected to
One year price chart
750
830
910
990
1,070
1,150
Sep‐14
Oct‐14
Nov‐14
Dec‐14
Jan‐15
Mar‐15
Apr‐15
May‐15
Jun‐15
Jul‐15
Aug‐15
Sep‐15
(INR)
Colgate
17 Edelweiss Securities Limited
Colgate Palmolive India
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18 Edelweiss Securities Limited
Consumer Goods
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19 Edelweiss Securities Limited
Colgate Palmolive India
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