RESULT UPDATE COLGATE PALMOLIVE - Business …bsmedia.business-standard.com/_media/bs/data/market-reports/equity...• Toothpaste – Colgate reported strong volume growth of 10% YoY

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Edelweiss Securities Limited

Colgate Palmolive’s (Colgate) Q1FY14 revenue (up 13.7% YoY) and overall

volume growth (9% YoY) came in line with our expectation, while PAT,

adjusted for one-off after tax gain of INR555mn, was slightly lower at

INR1,297. Key positives were (i) 11% YoY and ~10% YoY volume growth in

toothpaste and toothbrush respectively, (ii) volume market share gain in

toothpaste and toothbrush segments, and (iii) expansion in gross margin

by 146bps YoY. Key negatives were (i) contraction in EBITDA margin by

226bps YoY mainly due to surge in other expenditure (up 404bps YoY;

likely due to higher promotions and fuel costs) and (ii) YoY volume

decline in toothpowder and mouthwash (Plax) segments as per our

channel checks. We believe the company is well equipped to counter

competition from P&G’s entry in the toothpaste market. However, we

expect ad spends in the toothpaste category to accelerate due to

heightened competitive intensity and TRAI’s mandated cap on ad

duration on TV channels. Maintain ‘HOLD’.

Heightened competition propels promotions, dents margins

As highlighted in our preview note, despite healthy gross margin expansion of 146bps

YoY, EBITDA margin contracted by 226bps YoY. Other expenses (which include

promotions) increased by 37.2% YoY to INR2,028mn. Adjusted PAT at INR1,297mn,

grew 10.4% YoY. Colgate reported an exceptional post-tax gain of INR555mn with

respect to `slump-sale’ of Global Shared Services Organisation to Colgate Global

Business Services, a 100% subsidiary of Colgate-Palmolive Company, USA.

Market share improves in toothpaste, toothbrush segments

Colgate’s volume market share in the toothpaste category increased by 120bps in

H1CY13 to 55.9% vis-à-vis 54.7% in H1CY12. Its volume market share surged 270 bps

vis-à-vis H1CY12 to 41.4% in H1CY13.

Outlook and valuations: Fairly valued; maintain ‘HOLD’

At CMP, the stock is trading at 34.7x and 29.9x FY14E and FY15E, respectively. We

continue to like Colgate’s focus on innovation, distribution expansion and building

brand equity. We maintain our target multiple of 30x FY15E earnings to arrive at a TP

of INR1,411. We maintain ‘HOLD’ recommendation and rate it ‘Sector Performer’.

RESULT UPDATE

COLGATE PALMOLIVE Volumes soar; high ad spends to thwart rivals

EDELWEISS 4D RATINGS

Absolute Rating HOLD

Rating Relative to Sector Performer

Risk Rating Relative to Sector Medium

Sector Relative to Market Overweight

MARKET DATA (R: COLG.BO, B: CLGT IN)

CMP : INR 1,408

Target Price : INR 1,411

52-week range (INR) : 1,580 / 1,116

Share in issue (mn) : 136.0

M cap (INR bn/USD mn) : 191 / 3,317

Avg. Daily Vol.BSE/NSE(‘000) : 113.5

SHARE HOLDING PATTERN (%)

Current Q4FY13 Q3FY13

Promoters *

51.0 51.0 51.0

MF's, FI's & BK’s 5.6 5.2 5.4

FII's 21.3 21.6 21.6

Others 22.1 22.2 22.0

* Promoters pledged shares

(% of share in issue)

: NIL

PRICE PERFORMANCE (%)

Stock Nifty

EW Consumer

Goods Index

1 month 3.8 (0.2) 9.2

3 months 1.2 (1.2) 16.8

12 months 24.5 14.3 40.8

Abneesh Roy

+91 22 6620 3141

[email protected]

Pooja Lath

+91 22 6620 3075

[email protected]

India Equity Research| Consumer Goods

July 29, 2013

Financials

Year to March Q1FY14 Q1FY13 % change Q4FY13 % change FY13 FY14E FY15E

Revenues (INR mn) 8,597 7,561 13.7 8,315 3.4 31,638 36,896 43,168

EBITDA (INR mn) 1,653 1,625 1.7 1,687 (2.0) 6,568 7,480 8,751

Adjusted Net profit 1,297 1,174 10.4 1,232 5.3 4,968 5,516 6,395

Diluted EPS (INR) 9.5 8.6 10.4 9.1 5.3 36.5 40.6 47.0

Diluted P/E (x) 38.5 34.7 29.9

EV/EBITDA (x) 28.5 24.9 21.1

ROAE (%) 107.4 114.9 105.1

Consumer Goods

2 Edelweiss Securities Limited

Performance of peers

Colgate’s strongest competitor in the toothpaste category, Hindustan Unilever’s (HUL) oral

care portfolio, sustained double digits YoY growth in Close Up and Pepsodent in Q1FY14.

Pepsodent’s growth was led by the Expert Protection range led by high promotional activity.

Also, the third largest player in the category, Dabur’s oral care portfolio grew 8.6% YoY in

Q1FY14. Toothpaste grew by 14% YoY driven by growth in premium offerings. Toothpowder

witnessed marginal decline (like for Colgate), in line with shift in consumer preference to

toothpastes. Dabur expects toothpowder category to witness decline in the coming 2-3

years; it expects toothpastes to grow in the mid-teen levels in the coming quarters.

Impact of P&G’s entry in toothpaste market

P&G, effective July 1, 2013, launched Oral B toothpaste under three variants (Basic, Gel and

Sensitive) - All Rounder 32, All Rounder Gel and Pro-Health each in 3-4 different pack sizes

priced at 5-10% premium to similar offerings by Colgate. The launch was limited to metros

with focus on modern trade.

In our view, P&G’s entry seems ill-timed. Since the entry has been anticipated for years,

existing players are well prepared—Colgate, HUL and Dabur have stepped up aggression in

distribution, innovation and promotion; GSK is well entrenched in the premium segment.

We thus expect it to be a difficult and expensive affair for P&G. The toothpaste market, in

our view, is the toughest nut in the Indian consumer space to crack as it is strongly

dominated by Colgate, armed with an increasing and highest-ever market share. Also, as

P&G sharpens focus on the toothpaste category, its focus on shampoos, skin cream and

detergents is likely to wane, benefiting HUL, Dabur etc. Thus, we expect P&G’s entry to be

gradual and selective with no significant impact on Colgate’s dominance.

Key highlights from Annual Report 2012-13

• Toothpaste – Colgate reported strong volume growth of 10% YoY in FY13 and garnered

market share of 54.6% (up 170bps YoY).

• Toothbrush – Colgate reported strong volume growth of 20% YoY in FY13.

• Colgate divested its Global Shared Services Organisation (GSSO) IT/ITES services

division along with all its employees as well as assets and liabilities to the parent.

• New launches – Colgate launched two new toothpastes in FY13 in tow with new

segments of beauty - Colgate Visible White toothpaste, and gum care - Colgate Total

Pro Gum Health. It also launched two new toothbrushes 360 and Maxfresh and a new

variant of mouthwash.

• Plants – The new manufacturing facility in Sanand (Gujarat) will commence production

in FY14E. Also a new toothbrush manufacturing facility at Sricity (Andhra Pradesh) is

also to commence production in 2014. Post the sale of the Hyderabad factory Colgate

surrendered the lease of the land and sold the factory building to the Lessor, Swamy

Sons Agencies Private Limited for a total consideration of INR16mn.

Colgate Palmolive


Our recent meeting with Ms. Prabha Parameswaran | Key takeaways

No slowdown in the toothpaste category: Despite some top-end personal care categories

facing slowdown, demand for Colgate continues to be robust in toothpaste. However,

mouthwash growth has slackened (currently growing at 10-12% YoY as against 25-30% two

years back).

Margins to expand: With premiumization gaining ground despite discretionary slowdown,

(premium segment now contributing ~ 10% to sales versus negligible a few years ago) gross

margin is likely to expand as product mix improves (globally Colgate’s gross margins are 5-

7% higher than in India).

Growth opportunity: Colgate has posted 16% CAGR over FY08-13 and is confident of

growing strongly in the coming years. Growth opportunity stems from: (i) toothpaste

category’s rural penetration was at 63% (up from 42% in 2006) against 91% in urban areas;

and (ii) India’s per capita consumption being lowest in the world (at 137g).

Rural opportunity remains bright: Good monsoon, higher support prices for crops and

NREGA scheme will ensure higher disposable incomes coupled with adequate product

availability (due to enhanced rural reach) which will help boost rural penetration.

Strategy to increase consumption: India’s per capita consumption (PCC) is at 137g/year

(125g three years ago), half of that in China (277g) and one-fifth of US and Brazil. PCC has

grown primarily due to new users (converted significant number of non-users and

infrequent users to frequent users) and not as much due to habitual change (brushing twice)

which provides huge headroom for growth. Colgate is working towards this goal by

promoting night brushing which needs bringing about a change in the socio-cultural

behaviour. Government support in many other countries like Brazil, Sri Lanka plays a key

role in imbibing “brushing twice” as a habit through school programmes. In India, the

company has a drive “Bright Smiles Bright Futures”, which involves free dental check-ups

and teaching oral hygiene in schools; Colgate has touched ~100mn children through this

drive till now.

Mouthwash: The category is at infancy stage and is bound to grow rapidly in larger cities in

the coming years. This INR1bn-market category has been growing at a strong 30% YoY.

However, being a discretionary product, some slowdown is likely in the near term. Colgate’s

main competitors across the globe include Johnson & Johnson, GSK and P&G. Colgate is

encouraging the category growth with regular promotions in smaller SKU (60ml priced at

INR40) to induce repeat purchase that will eventually lead to habit formation. We believe

uni-dosage is a growth opportunity in the mouthwash space which will help rapid category

expansion.

Portfolio gap with parent: The company has brought in several products from the global

portfolio to India, the latest being Colgate Visible White. It will continue this depending

upon the development of the Indian toothpaste market and probability of acceptance by

the Indian consumer. Colgate’s Indian portfolio will thus never be complete due to the

dynamic nature of the market where lifestyle changes provide opportunity for newer

solutions (new toothpaste offerings) to be introduced.

Hand-wash segment: Colgate remains open to the hand-wash categorywhich is a stronghold

in many other markets) when the category evolves from the current positioning of markets

Ms. Prabha Parameswaran,

Managing Director,

Colgate-Palmolive

Consumer Goods


on anti-bacterial products to more premium and differentiated offerings like moisturizing

and fragrance oriented products gaining centre-stage (which is the company’s forte).

R&D centre: Colgate has an Indian R&D centre dedicated to local research which reports to

the global research centre. This helps address local needs with global technological support.

Active salt and toothpowder were designed specifically to cater to the Indian cultural needs.

Though localisation focused innovation is of prime importance currently, as people’s

exposure to global environment increases, replicating the global portfolio will become more

relevant.

Pricing strategy: Colgate uses analytics to measure price sensitivity and accordingly takes

pricing action to ensure minimum impact on volume growth. For instance, pricing action is

less aggressive in categories like the INR5 price point and the 50g pack where users are price

sensitive. Raw material also plays a vital role in determining pricing action.

Sensitive toothpaste category: Rising awareness among consumers has rendered the

sensitive toothpaste category a highly attractive segment to operate in. The segment has

been growing at a higher clip (over a low base) and also at the cost of toothpastes

positioned as herbal and medical. Currently, ~17% of population is a potential customer in

this category; hence, it is likely to be significantly a large category of the total toothpaste

market in the next three to five years. Competition in the category has helped expand size

which is likely to help Colgate.

Chart 1: Volume growth robust in toothpaste category

Source: Company, Edelweiss research

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Colgate Palmolive


Chart 2: Gross margin expands 146bps YoY – highest in past 10 quarters

Chart 3: EBITDA margin dips 226bps YoY mainly due to high other costs

Chart 4: Ad spends increase 72bps YoY


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Consumer Goods


Chart 5: Tax rate at 24%

Chart 6: Per capita consumption of toothpaste low in India

Chart 7: Rural penetration lower than urban – driver for future growth


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Colgate Palmolive


Chart 8: Gross margin comparison with peers


Outlook and valuations: Fairly valued; maintain ‘HOLD’

We continue to like Colgate’s focus on innovation, distribution expansion and building brand

equity. We believe the company is well equipped to counter competition from P&G’s

impending entry in the toothpaste market. However, we expect ad spends in the toothpaste

category to accelerate. We maintain target P/E multiple at 30x FY15E EPS arriving at a target

price of INR1,411. We maintain ‘HOLD’ and rate the stock ‘Sector Performer’ on relative

return basis.

Chart 9: 1 year forward PE chart


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Colgate earns one of the highest

margins in the Consumer space

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category and strong brand equity.

Margins could come under

pressure as pricing power

moderates due to P&G's foray

into the Indian toothpaste space.

Consumer Goods


Financial snapshot (INR mn)

Year to March Q1FY14 Q1FY13 % change Q4FY13 % change FY13 FY14E FY15E

Net revenues 8,446 7,361 14.7 8,116 4.1 30,841 35,961 42,074

Other operating income 151 200 (24.7) 200 (24.5) 797 935 1,094

Total operating income 8,597 7,561 13.7 8,315 3.4 31,638 36,896 43,168

Cost of goods sold 3,283 2,997 9.5 3,222 1.9 12,502 14,564 17,040

Gross profit 5,314 4,564 16.4 5,093 4.3 19,136 22,332 26,128

Staff costs 620 624 (0.7) 696 (10.9) 2,494 2,913 3,408

Advertisement 1,014 837 21.1 821 23.5 3,546 4,315 5,049

Other expenses 2,028 1,478 37.2 1,890 7.3 6,528 7,624 8,920

EBITDA 1,653 1,625 1.7 1,687 (2.0) 6,568 7,480 8,751

Depreciation 117 105 11.7 113 4.2 437 494 540

EBIT 1,535 1,520 1.0 1,574 (2.4) 6,131 6,986 8,212

Other income 171 112 52.6 121 41.6 499 524 614

Interest - - - - 5 5

Profit before tax 1,707 1,632 4.6 1,695 0.7 6,630 7,504 8,821

Provision for taxes 410 457 (10.4) 463 (11.4) 1,663 1,989 2,426

Core profit 1,297 1,174 10.4 1,232 5.3 4,968 5,516 6,395

Exceptionals (net of tax) 555 - - - 555 -

Reported profit 1,852 1,174 57.7 1,232 50.3 4,968 6,071 6,395

Diluted EPS (INR) 9.5 8.6 10.4 9.1 5.3 36.5 40.6 47.0

As % of net revenues

COGS 38.2 39.6 38.7 39.5 39.5 39.5

Employee cost 7.2 8.3 8.4 7.9 7.9 7.9

Advertisement 11.8 11.1 9.9 11.2 11.7 11.7

Other expenditure 23.6 19.5 22.7 20.6 20.7 20.7

EBITDA 19.2 21.5 20.3 20.8 20.3 20.3

EBIT incl. other income 19.9 21.6 20.4 21.0 20.4 20.4

PBT 19.9 21.6 20.4 21.0 20.3 20.4

Reported net profit 21.5 15.5 14.8 15.7 16.5 14.8

Tax rate 24.0 28.0 27.3 25.1 26.5 27.5

Colgate Palmolive


Company Description

Colgate is India’s biggest oral care products company with more than 95% of its sales

coming from this product category. The company has products across variants and price

points in toothpaste, toothpowder, and toothbrushes, and is the leader in each of these

categories.

Investment Theme

Colgate is market leader in oral care category with ~55.9% 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

New entrants like P&G could hit the company hard.

Further risks arise from down trading by consumers due to the delayed monsoon, gloomy

macroeconomic environment and rising food inflation.

Deficient rainfall could impact agricultural activity, which in turn could hit rural demand.

Sharp rise in input prices or continued depreciation of the INR could increase cost of

imported chemicals.


Consumer Goods

Financial Statements

Income statement (INR mn)

Year to March FY12 FY13 FY14E FY15E

Net revenue 26,239 30,841 35,961 42,074

Other Operating Income 694 797 935 1,094

Total operating income 26,932 31,638 36,896 43,168

Materials costs 10,502 12,502 14,564 17,040

Gross profit 16,430 19,136 22,332 26,128

Employee costs 2,156 2,494 2,913 3,408

Other Expenses 5,859 6,528 7,624 8,920

Advertisement & sales costs 2,630 3,546 4,315 5,049

EBITDA 5,785 6,568 7,480 8,751

Depreciation & Amortization 393 437 494 540

EBIT 5,392 6,131 6,986 8,212

Other income 507 499 524 614

Interest expenses 15 - 5 5

Profit before tax 5,884 6,630 7,504 8,821

Provision for tax 1,419 1,663 1,989 2,426

Core profit 4,465 4,968 5,516 6,395

Prior period adjustments (net) - - 555 -

Reported profit 4,465 4,968 6,071 6,395

Diluted EPS (INR) 32.8 36.5 40.6 47.0

Dividend per share (INR) 25.0 28.0 33.5 35.3

Dividend payout (%) 76.1 76.7 75.0 75.0

Common size metrics


Materials costs 39.0 39.5 39.5 39.5

Employee expenses 8.0 7.9 7.9 7.9

EBITDA margins 21.5 20.8 20.3 20.3

EBIT margins 20.0 19.4 18.9 19.0

Net profit margins 16.6 15.7 14.9 14.8

Growth ratios (%)


Revenues 17.8 17.5 16.6 17.0

EBITDA 12.4 13.5 13.9 17.0

Net profit 10.9 11.3 11.0 15.9

EPS 10.9 11.3 11.0 15.9

Key Assumptions


Macro assumptions

GDP(Y-o-Y %) 6.2 5.0 5.6 6.5

Inflation (Avg) 8.9 7.4 5.2 6.0

Repo rate (exit rate) 8.5 7.5 6.8 6.0

USD/INR (Avg) 48.0 54.5 58.0 56.0

Company assumptions

Volume growth 12.0 10.0 9.5 10.0

Pricing change 6.2 7.5 7.1 7.0

EBITDA margin assumptions

Chemicals 36.1 33.4 36.4 36.4

Tubes and Containers 22.1 19.2 21.9 21.9

Oils 12.7 13.4 13.3 13.3

Cartons 11.7 10.0 11.5 11.5

COGS as % of sales 39.0 39.5 39.5 39.5

Staff costs as % of sales 8.2 8.1 8.1 8.1

A&P as % of sales 9.8 11.2 11.7 11.7

Financial assumptions

Tax rate (%) 24.1 25.1 26.5 27.5

EBITDA margin 21.5 20.8 20.3 20.3

Capex (INR mn) 333 604 (310) 670

Debtor days 11 9 11 11

Inventory days 65 59 62 62

Payable days 130 122 127 127

Cash conversion cycle (days) (55) (54) (55) (55)

Depreciation as % of gross block 6.6 6.8 7.0 7.0

Dividend as % of net profit 76.1 76.7 75.0 75.0

Yield on cash 14.2 10.5 11.0 10.5


Colgate Palmolive

Peer comparison valuation

Market cap Diluted PE (X) EV/EBITDA (X) ROAE (%)

Name (USD mn) FY14E FY15E FY14E FY15E FY14E FY15E

Colgate 3,317 34.7 29.9 24.9 21.1 114.9 105.1

Asian Paints 8,227 35.8 28.8 22.4 18.9 36.6 37.3

Dabur 5,061 31.8 25.9 23.9 19.1 38.8 37.7

Emami 1,906 28.9 24.2 24.4 20.2 44.2 45.1

GlaxoSmithKline Consumer Healthcare 3,563 40.7 35.0 28.4 24.1 33.8 32.9

Godrej Consumer 4,957 34.2 29.6 24.2 20.9 21.6 21.6

Hindustan Unilever 24,254 37.9 34.3 28.5 25.0 106.7 88.3

ITC 49,198 31.7 26.6 20.6 17.3 36.4 38.8

Marico 2,366 27.4 22.4 17.6 14.6 29.8 28.6

Nestle Ltd 8,879 42.3 34.7 24.4 20.4 57.7 53.3

United Spirits 6,353 56.0 40.7 26.9 22.4 10.9 11.5

AVERAGE - 36.5 30.2 24.2 20.4 48.3 45.5

Source: Edelweiss research

Cash flow metrics


Operating cash flow 4,028 6,149 5,519 7,195

Investing cash flow (102) (473) 865 (670)

Financing cash flow (3,980) (4,276) (5,296) (5,579)

Net cash flow (55) 1,400 1,087 946

Capex (333) (604) 310 (670)

Dividends paid (3,951) (4,426) (5,291) (5,574)

Profitability & efficiency ratios


ROAE (%) 109.0 107.4 114.9 105.1

ROACE (%) 167.4 166.5 163.6 163.7

Inventory day 65 59 62 62

Debtors days 11 9 11 11

Payable days 130 122 127 127

Cash conversion cycle (days) (55) (54) (55) (55)

Current ratio 1.1 1.0 1.2 1.3

Operating ratios


Total asset turnover 6.8 7.1 7.3 7.4

Fixed asset turnover 9.2 9.0 10.8 14.0

Equity turnover 6.6 6.8 7.0 7.1

Valuation parameters


Diluted EPS (INR) 32.8 36.5 40.6 47.0

Y-o-Y growth (%) 10.9 11.3 11.0 15.9

CEPS (INR) 35.7 39.7 44.2 51.0

Diluted PE (x) 42.9 38.5 34.7 29.9

Price/BV (x) 44.0 39.1 33.7 29.5

EV/Sales (x) 7.0 5.9 5.0 4.3

EV/EBITDA (x) 32.6 28.5 24.9 21.1

Dividend yield (%) 1.8 2.0 2.4 2.5

Balance sheet (INR mn)

As on 31st March FY12 FY13 FY14E FY15E

Equity capital 136 136 136 136

Reserves & surplus 4,218 4,760 5,539 6,360

Shareholders funds 4,354 4,896 5,675 6,496

Borrowings 1 - - -

Deferred tax liability (121) (224) (224) (224)

Sources of funds 4,233 4,671 5,451 6,271

Tangible assets 2,544 2,807 2,962 3,073

CWIP (incl. intangible) 694 1,020 60 80

Total net fixed assets 3,238 3,826 3,022 3,153

Non current investments 471 471 471 471

Cash and equivalents 3,098 4,288 5,375 6,321

Inventories 2,177 1,853 2,474 2,894

Sundry debtors 873 812 1,088 1,273

Loans and advances 1,246 1,548 1,548 1,548

Other current assets 72 45 45 45

Total current assets (ex cash) 4,368 4,258 5,155 5,761

Trade payable 3,690 4,666 5,067 5,929

Others current liabilities 3,251 3,506 3,506 3,506

Total cur. liabilities & provisions 6,942 8,172 8,573 9,435

Net current assets (ex cash) (2,574) (3,914) (3,418) (3,674)

Uses of funds 4,233 4,671 5,451 6,271

Book value per share (INR) 32.0 36.0 41.7 47.8

Free cash flow (INR mn)


Net profit 4,465 4,968 6,071 6,395

Add : Non cash charge 1,102 1,234 (56) 545

Depreciation 393 437 494 540

Others 709 797 (550) 5

Gross cash flow 5,567 6,202 6,015 6,940

Less: Changes in WC 855 (1,360) 496 (256)

Operating cash flow 4,712 7,562 5,519 7,195

Less: Capex 333 604 (310) 670

Free cash flow 4,379 6,958 5,829 6,525


Consumer Goods

Top 10 holdings

Perc. Holding Perc. Holding

Oppenheimerfunds Incorporated 5.64 Arisaig Partners Asia Pte Ltd 3.53

Life Insurance Corp Of India 3.47 Virtus Emerging Markets 1.24

Harris Trust & Savings Bank 1.24 Wasatch Advisors Inc 1.15

Vontobel Asset Management Ag 0.80 Columbia Wanger Asset Management 0.78

Vanguard Group Inc 0.53 Eastspring Investments Singapor 0.50

*as per last available data

Insider Trades Reporting Data Acquired / Seller B/S Qty Traded

No Data Available

*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

Mukul Deoras Chairman Mr. R. A. Shah Vice Chairman

P.K. Ghosh Deputy Chairman Prabha Parameswaran Managing Director

Paul Alton Whole-time Finance Director Niket Ghate Whole-time Director, Company Secretary

Vikram Singh Mehta Executive Director J.K. Setna Non-executive Director

Indu Shahani Non-executive Director

Auditors - Price Waterhouse - Chartered Accountants

*as per last annual report


Company Absolute

reco

Relative

reco

Relative

risk

Company Absolute

reco

Relative

reco

Relative

Risk

Asian Paints BUY SP M Bajaj Corp BUY SP M

Colgate HOLD SP M Dabur BUY SO M

Emami BUY SP H GlaxoSmithKline Consumer

Healthcare

HOLD SP M

Godrej Consumer BUY SO H Hindustan Unilever HOLD SU L

ITC BUY SO L Marico BUY SP M

Nestle Ltd HOLD SP L 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


Consumer Goods

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.

Board: (91-22) 4009 4400, Email: [email protected]

Vikas Khemani Head Institutional Equities [email protected] +91 22 2286 4206

Nischal Maheshwari Co-Head Institutional Equities & Head Research [email protected] +91 22 4063 5476

Nirav Sheth Head Sales [email protected] +91 22 4040 7499

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, GlaxoSmithKline Consumer Healthcare,

United Spirits

Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 127 44 8 180

* 1 stocks under review

Market Cap (INR) 112 54 14

Date Company Title Price (INR) Recos

Recent Research

29-Jul-13 Hindustan

Unilever

Soaps lather profits, but

personal care disappoints;

Result Update

639 Hold

26-Jul-13 ITC Margins surprise; cigarette

sales optically weak;

Result Update

359 Buy

25-Jul-13 Dabur Volumes do a robust Namaste;

Result Update

171 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


Colgate Palmolive

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Consumer Goods

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RESULT UPDATE COLGATE PALMOLIVE - Business …bsmedia.business-standard.com/_media/bs/data/market-reports/equity...• Toothpaste – Colgate reported strong volume growth of 10% YoY