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1
SYNOPSIS
Colgate-Palmolive (India) Limited
engages in the manufacture and
marketing of fast moving consumer
goods in India and internationally.
The company is maintaining its
leadership position at 52.5% market
share (Dec 10-Nov 11).
Net profit has Phenomenal surged by
75% to Rs.1155.80 mn and strong
growth in revenue of 19.62% for the
quarter ended Dec 2011.
Company has paid advance to
Gujarat Industrial Development
Corporation towards land for
manufacturing facility at Sanand.
Net Sales and Operating profit of the
company are expected to grow at a
CAGR of 15% and 10% over 2010 to
2013E respectively.
Years Net sales EBITDA Net Profit EPS P/E
FY 11 22968.60 5574.90 4025.80 29.60 33.34
FY 12E 27189.59 6099.90 4329.40 31.83 31.00
FY 13E 30724.24 6905.05 4928.84 36.24 27.23
Stock Data:
Sector: FMCG
Face Value Rs. 1.00
52 wk. High/Low (Rs.) 1084.30/783.20
Volume (2 wk. Avg.) 47673
BSE Code 500830
Market Cap (Rs.In mn) 134232.00
Share Holding Pattern
1 Year Comparative Graph
Colgate Palmolive BSE SENSEX
C.M.P: Rs. 987.00 Target Price: Rs. 1115.00 Date: Feb 01st, 2012 BUY
Colgate Palmolive (India) Ltd Result Update: Q3 FY 12
2
Peer Group Comparison
Name of the company CMP(Rs.) Market
Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)
Colgate Palmolive 987.00 134232.00 31.60 31.23 34.95 2200.00
ITC 204.75 1595324.20 7.48 27.37 10.04 445.00
Dabur 95.30 168880.60 2.74 34.78 15.30 115.00
HUL 396.00 855773.70 11.67 33.93 32.49 650.00
Investment Highlights
Q3 FY12 Results Update
Colgate Palmolive India has posted a net profit of Rs 1,155.80 million for
the quarter ended December 31, 2011 as compared to Rs 662.70 million for
the quarter ended December 31, 2010, representing an increase of 74.41%. Net
sales has increased from Rs 5766.40 million for the quarter ended December 31,
2010 to Rs 6897.80 million for the quarter ended December 31, 2011, representing
an increase of 19.62%. Total Income surged to Rs.6995.20 million for the quarter
ended Dec 2011. The EPS of the company is stood at Rs.8.50 for the quarter ended
Dec 2011.
Quarterly Results - Standalone (Rs in mn)
As At Dec-11 Dec -10 %change
Net sales 6897.80 5766.40 19.62
PAT 1155.80 662.70 74.41
Basic EPS 8.50 4.87 74.41
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Break up of Expenditure
Declaration of dividend
Colgate Palmolive (India) Ltd has declared a second interim dividend of Rs. 9/-
(Rupees nine only) per equity share of Re. 1/- (face value) for the financial year
ending March 31, 2012.
Manufacturing facility at Sanand unit
Company has paid an advance of Rs 4,263 Lacs to Gujarat Industrial Development
Corporation (GIDC) towards net allotment price for the lease of plot of land for the
proposed Toothpaste manufacturing facility at Sanand, Gujarat.
4
Company Profile
Colgate-Palmolive is Rs1,300 crore company started in year 1937. In domestic market
it enjoys 50% of market share. It spread across 4.5 million retails outlets out of which
1.5 million are direct outlets.
The Company is having four wholly owned subsidiaries namely Colgate-Palmolive
(Nepal), Multimint Leasing & Finance and Jigs Investments and Passion Trading &
Investment Company.
In November 2007, it acquired a 75% equity interest in Advanced Oral Care Products,
Professional Oral Care Products and SS Oral Hygiene Products, the company is the
fastest growing and one of the oldest companies catering to the personal care
products. The company is regularly coming up with new products and has been a
consintent financial performer.
Products
Oral care-Under this segment the company offers product like toothpastes,
toothbrush, tooth powder & tooth whitening products.
Personal care -In this segment it offer products skin care, hair care, body wash, &
shaving creams
Household care-Under this segment it has launched brand AXIOM-a dish washing
paste.
It has also introduced new products namely Colgate dental floss, ORAGARD-B a
mouth ulcer cream etc.
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Financial Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) FY10 FY11 FY12E FY13E
Description 12m 12m 12m 12m
Net Sales 20352.00 22968.60 27189.59 30724.24
Other Income 254.00 305.00 404.43 452.96
Total Income 20606.00 23273.60 27594.02 31177.20
Expenditure -15367.30 -17698.70 -21494.12 -24272.15
Operating Profit 5238.70 5574.90 6099.90 6905.05
Interest -15.00 -32.90 -24.15 -25.35
Gross profit 5223.70 5542.00 6075.76 6879.70
Deprecation -375.70 -342.50 -397.06 -436.77
Profit Before Tax 4848.00 5199.50 5678.70 6442.93
Tax -615.40 -1173.70 -1349.30 -1514.09
Profit After Tax 4232.60 4025.80 4329.40 4928.84
Equity capital 136.00 136.00 136.00 136.00
Reserves 3125.10 3704.50 8033.90 12962.74
Face value 1.00 1.00 1.00 1.00
EPS 31.12 29.60 31.83 36.24
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Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) 30-Jun-11 30-Sep-11 31-Dec-11 31-Mar-12E
Description 3m 3m 3m 3m
Net sales 6293.70 6755.40 6897.80 7242.69
Other income 119.80 94.70 97.40 92.53
Total Income 6413.50 6850.10 6995.20 7335.22
Expenditure -4938.10 -5447.50 -5404.90 -5703.62
Operating profit 1475.40 1402.60 1590.30 1631.60
Interest -6.10 -7.50 -5.70 -4.85
Gross profit 1469.30 1395.10 1584.60 1626.76
Depreciation -88.00 -105.70 -99.20 -104.16
Profit Before Tax 1381.30 1289.40 1485.40 1522.60
Tax -376.90 -292.60 -329.60 -350.20
Profit After Tax 1004.40 996.80 1155.80 1172.40
Equity capital 136 136 136 136
Face value 1.00 1.00 1.00 1.00
EPS 7.39 7.33 8.50 8.62
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Key Ratios
Particulars FY10 FY11 FY12E FY13E
No. of Shares(In Million) 136.00 136.00 136.00 136.00
EBITDA Margin (%) 25.74% 24.27% 22.43% 22.47%
PBT Margin (%) 23.82% 22.64% 20.89% 20.97%
PAT Margin (%) 20.80% 17.53% 15.92% 16.04%
P/E Ratio (x) 31.71 33.34 31.00 27.23
ROE (%) 129.79% 104.82% 52.99% 37.63%
ROCE (%) 169.77% 154.06% 79.52% 56.05%
Debt Equity Ratio 0.01 0.00 0.00 0.00
EV/EBITDA (x) 25.62 24.08 22.01 19.44
Book Value (Rs.) 23.98 28.24 60.07 96.31
P/BV 41.16 34.95 16.43 10.25
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Charts:
9
10
Outlook and Conclusion
At the current market price of Rs.987.00, the stock is trading at 31.00 x FY12E
and 27.23 x FY13E respectively.
Earning per share (EPS) of the company for the earnings for FY12E and FY13E
is seen at Rs.31.83 and Rs.36.24 respectively.
Net Sales and Operating profit of the company are expected to grow at a CAGR
of 15% and 10% over 2010 to 2013E respectively.
On the basis of EV/EBITDA, the stock trades at 22.01 x for FY12E and 19.44 x
for FY13E.
Price to Book Value of the stock is expected to be at 16.43 x and 10.25 x
respectively for FY12E and FY13E.
We expect that the company will keep its growth story in the coming quarters
also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs.1115.00 for Long term investment.
Industry Overview
Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer
packaged goods. Items in this category include all consumables (other than
groceries/pulses) people buy at regular intervals. The most common in the list are
toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish,
packaged foodstuff, household accessories and extends to certain electronic goods.
These items are meant for daily of frequent consumption and have a high return.
A major portion of the monthly budget of each household is reserved for FMCG
products. The volume of money circulated in the economy against FMCG products is
very high, as the number of products the consumer use is very high. Competition in
the FMCG sector is very high resulting in high pressure on margins
FMCG companies maintain intense distribution network. Companies spend a large
portion of their budget on maintaining distribution networks. New entrants who wish
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to bring their products in the national level need to invest huge sums of money on
promoting brands. Manufacturing can be outsourced. A recent phenomenon in the
sector was entry of multinationals and cheaper imports. Also the market is more
pressurized with presence of local players in rural areas and state brands
Scope of the Sector
The Indian FMCG sector with a market size of Rs.1,35,000 crore is the fourth largest
sector in the economy. A well-established distribution network, intense competition
between the organized and unorganized segments characterizes the sector.
The Rs.1,35,000 crore FMCG market in India is growing at a fast pace despite of the
economic downtrend. The increasing disposable income and improved standard of
living in most tier II and tire III cities are spearheading the FMCG growth across the
nation. The changing profile and mind set of the consumers has shifted the thought to
“Value for Money” from “Money for Value”.
According to a FICCI-Technopak report, India's FMCG sector is poised to reach US$
43 billion by 2013 and US$ 74 billion by 2018. The report states that implementation
of the proposed goods and services tax (GST) and the opening of foreign direct
investment (FDI) are expected to fuel growth further and raise the industry's size to
US$ 47 billion by 2013 and US$ 95 billion by 2018.
According to a study by research firm The Nielson Company, the fast moving
consumer goods market (FMCG) in rural India is tipped to touch US$100 billion by
2025 on the back of "unrelenting" demand driven by rising income levels. According to
the study, rural India accounts for more than half of sales in some of the largest
FMCG categories.
At present, rural consumers spend about US$ 9 billion per annum on FMCG items
and product categories such as instant noodles, deodorant and fabric, with the pace of
consumption growing much faster than urban areas, as per the findings.
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“The industry will witness a spate of acquisitions & mergers in the 2010. There will be
a renewed focus on rural consumers too,” by an analyst based in Mumbai.
The fast moving consumer goods (FMCG) sector is expected to grow 13 per cent during
FY 2010-11 on the back of strong economic growth, a good monsoon and subsequent
rise in rural income, according to an industry body.
Over the years companies like HUL, ITC and Dabur have improved performance with
innovation and strong distribution channels. Their key categories have strengthened
their presence and outperformed peers in the FMCG sector. On the contrary, Colgate
Palmolive and Britannia Industries are strong in single product category i.e. tooth
pastes and Biscuits. In addition companies have been successful in reviving their
presence in the semi-urban and rural markets.
Major investments
Some of the major investments in the industry are:
• Chennai-based FMCG company CavinKare is planning to invest around US$
109.50 million over the next two years in various expansion plans, including a
greenfield facility for namkeen at Thane, cool drinks in the North and others.
• Nestle, the fast moving consumer goods major, plans to invest US$ 50.49
million to set up its first research and development (R&D) centre in India at
Manesar in adjoining Gurgaon district. The facility will be made operational by
July 2012.
• Packaged consumer goods company GlaxoSmithKline Consumer Healthcare
(GSKCH) plans to invest over US$ 64.87 million on repositioning milk food
drink Horlicks as the company’s umbrella brand.
• FieldFresh Foods , joint venture of the Bharti Enterprises and Del Monte Pacific
Ltd, has inaugurated their Research and Development and manufacturing
facility in Hosur, Tamil Nadu at an investment of US$ 25.93 million.
• Agri solutions provider Buhler India plans to invest US$ 22.55 million in an
integrated manufacturing unit and other expansion projects in the next four
years, in line with its plans to achieve US$ 225.49 million turnover by 2014.
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• Soft drinks and snacks major Pepsico is planning to invest US$ 500 million in
India in the next two years.
• Atlanta-based Coca Cola Company plans to invest up to US$ 120.75 million to
set up a new bottling plant in Karnataka, India
________________ ____ _________________________ Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
14
Firstcall India Equity Research: Email – [email protected]
C.V.S.L.Kameswari Pharma
U. Janaki Rao Capital Goods
A. Rajesh Babu FMCG
H.Lavanya Oil & Gas
Ashish.Kushwaha Diversified
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