Colgate-Palmolive - Standard Chartered Securities

Colgate-Palmolive (India) (UNDERPERFORM): 3Q FY12 - Low base helps strong profit growth:

- Results above expectations - Net sales, EBITDA and net profit growth at 20%, 60% and 75%, respectively.

- Toothpaste volume growth strong at 15%.

- Gross margins improve - Raw material cost-to-sales declined 90bps yoy and 50bps qoq to 39.6%.

- High base led to 11% decline in adspend and a muted 2% growth in staff costs. Decline in tax rate resulted in a sharp 75% growth in net profit. Despite the strong performance, net profit growth in 9m FY12 stands muted at 9.5%.

- At one-year forward P/E of 26.2x valuations remain rich. Maintain UP with revised price target of Rs961.

Source : Equity Bulls

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