Colgate - Strengthening foothold in Oral care market - Destimoney

We had initiated a coverage on Colgate with accumulate rating (Dec 15, 2011) based on its strong brand equity and product reach in India.

The company's top line has been growing consistently in high teens with volume growth at mid teen range. Colgate's volume market share in tooth paste segment increased to 54.5% in during Jan-Jun 2012 period from 52.4% during same period in last year.

Similarly the company strengthened its position in tooth brush category with 38.2% share, which is nearly 200 bps improvement in one year. It has launched two variants i.e. Colgate 360 Battery Toothbrush and Colgate Max Fresh Toothbrush.

In a premium sensitive tooth paste segment, Colgate Sensitive tooth paste has a new major competitor in i.e. HUL's Pepsodent Expert Protection along with GSK Pharmaceuticals' Sensodyne.

The company is increasing its manufacturing base by investing in new facilities at Sanand in Gujarat (tooth paste) and Sri City in Andhra Pradesh (tooth brush). Both the factories are expected to be operational from 2013.

Conversion from tooth powder to tooth paste in rural India (45% tooth paste penetration) has been a major growth driver for oral care companies like Colgate. Therefore, we expect the company to grow at 12%-14% rate comfortably in next three years. We re-iterate our ACCUMULATE rating on Colgate with a revised target price of Rs.1,270 per share.

Source : Equity Bulls

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