23 may 2020 results review 4qfy20 colgate palmolive - 4qfy20 - hsie... · 2020-05-23 · colgate...

23 May 2020 Results Review 4QFY20

Colgate Palmolive

HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters

Muted Q4, signs of improving execution

Colgate saw a 7% yoy dip in its revenues as lockdown impacted primary sales.

However, co witnessed positive momentum pre-Covid with market share gain

for toothpaste. Most personal care companies/categories struggled in 4Q (HUL

BPC down by 14% yoy, Marico PCNO/VAHO down by 12/18% yoy, GCPL

India business down 18% yoy and Gillette down 13% yoy). We believe oral

care being an essential category will recover quickly and revenue loss due to

channel disruption will be minimal (unlike many FMCG categories). Co’s

new launches are exciting and expect similar aggression in the coming years.

Focus on MT/Ecomm channel will continue to drive its premium portfolio and

market share gain (160/200bps yoy market share gain in MT/Ecomm channel

in 4Q). Co expects to expand its gross margin and is investing behind its

brands. We cut EPS estimates for FY21/FY22 by 3% to factor in subdued

category growth and moderation in premiumisation trend. We value

COLGATE at 38x on Mar-22E EPS, deriving a TP of Rs 1,328. Maintain ADD.

Revenue decline of 7%: Revenue declined by 7% yoy (+6% in 4QFY19 and

+4% in 3QFY20) vs our estimate of flat revenue. Volume declined by 8%

(+5% in 4QFY19 and +2% in 3QFY20). Given loss of sales in last 10 days of

March, we believe volume growth was 2.5-3% pre-Covid (similar to 3Q

trend). New launches like Charcoal clean and PC products like essential oil

shampoos, body washes, etc under Palmolive saw strong traction. Launches

like Naturals toothrushes and new marketing campaign for Vedshakti aided

revenue growth pre-Covid. Co has also launched hand sanitizers in April.

EBITDA margin dip by 234bps yoy: GM was up by 9bps yoy (-57bps in

4QFY19 and +99bps in 3QFY20) to 64.7% (lower than estimates). Employee

expenses were up by 22% while ASP/other expenses saw a decline of 1/10%.

ASP acceleration was missing in FY19 (up 7% yoy) but grew by 15/9% yoy in

9MFY20/FY20. This reflects that management has stepped up aggression wrt

investment behind its brands. EBITDA margin was down by 237bps to

24.5% (-127bps in 4QFY19 and -105bps in 3QFY20). EBITDA declined by

15% (+1% in 4QFY19, flat in 3QFY20). Higher other income (+64% yoy) and

lower taxes led to a 3% growth in PAT to Rs 2.04bn (est Rs 1.99bn).

Call & other takeaways: (1) Co has increased its focus on Ecomm by

constituting a dedicated team to drive growth, (2) Market share gains across

its portfolio in 4QFY20, in March co gained 80bps yoy market share, (3)

Toothpaste category growth in 2019 was at 4% yoy with flat volume. In

4QFY20, growth was 2% yoy with 3% volume dip, (4) Cash & equivalents

are at Rs 4.8bn which is an improvement over Rs 4.2bn in FY19, (5) Co has

repaid its debt which was Rs 777mn in FY19.

Financial Summary

YE Mar (Rs mn) Q4

FY20

Q4

FY19

YoY

(%)

Q3

FY20

QoQ

(%) FY19 FY20P FY21E FY22E

Net Sales 10,713 11,538 (7.1) 11,472 (6.6) 44,624 45,456 47,466 51,171

EBITDA 2,629 3,104 (15.3) 3,161 (16.8) 12,361 12,017 12,949 14,319

APAT 2,042 2,002 2.0 1,991 2.5 7,502 8,165 8,488 9,520

Diluted EPS (Rs) 7.5 7.4 2.0 7.3 2.5 27.6 30.0 31.2 35.0

P/E (x)

47.6 43.8 42.1 37.5

EV / EBITDA (x)

28.6 29.3 27.2 24.3

RoCE (%)

67.2 64.7 63.9 75.2

Source: Company, HSIE Research

ADD

CMP (as on 22 May 2020) Rs 1,313

Target Price Rs 1,328

NIFTY 9,039

KEY

CHANGES OLD NEW

Rating ADD ADD

Price Target Rs 1,372 Rs 1,372

EPS % FY21E FY22E

-3% -3%

KEY STOCK DATA

Bloomberg code CLGT IN

No. of Shares (mn) 272

MCap (Rs bn) / ($ mn) 357/4,708

6m avg traded value (Rs mn) 1,158

52 Week high / low Rs 1,643/1,065

STOCK PERFORMANCE (%)

3M 6M 12M

Absolute (%) (2.2) (12.7) 14.9

Relative (%) 23.3 11.3 36.4

SHAREHOLDING PATTERN (%)

Dec-19 Mar-20

Promoters 51.00 51.00

FIs & Local MFs 10.20 9.96

FPIs 16.49 16.19

Public & Others 22.31 22.85

Pledged Shares 0.00 0.00

Source : BSE

Varun Lohchab

[email protected]

+91-22-6171-7334

Naveen Trivedi

[email protected]

+91-22-6171-7324

Aditya Sane

[email protected]

+91-22-6171-7336

Page | 2

Colgate Palmolive: Results Review 4QFY20

Quarterly Financial Snapshot

Particulars (Rs mn) 4QFY20 4QFY19 YoY

(%) 3QFY20

QoQ

(%) FY20 FY19

YoY

(%)

Net Revenue 10,713 11,538 (7.1) 11,472 (6.6) 44,876 44,624 0.6

Material Expenses 3,786 4,088 (7.4) 3,931 (3.7) 15,729 15,586 0.9

Employee Expenses 899 735 22.3 770 16.7 3,323 2,959 12.3

ASP Expenses 1,555 1,563 (0.5) 1,434 8.4 6,149 5,647 8.9

Other Operating Expenses 1,844 2,048 (9.9) 2,176 (15.3) 7,922 8,072 (1.9)

EBITDA 2,629 3,104 (15.3) 3,161 (16.8) 12,017 12,361 (2.8)

Depreciation 462 394 17.3 515 (10.3) 1,979 1,592 24.4

EBIT 2,167 2,711 (20.1) 2,646 (18.1) 10,038 10,769 (6.8)

Other Income 196 120 64.4 58 238.6 492 377 30.7

PBT 2,363 2,830 (16.5) 2,704 (12.6) 10,530 11,146 (5.5)

Exceptional - (36) na - na - 305 na

PBT after exceptional 2,363 2,794 (15.4) 2,704 (12.6) 10,530 11,451 (8.0)

Tax 302 793 (61.9) 683 (55.8) 2,269 3,670 (38.2)

RPAT 2,042 1,976 3.3 1,991 2.5 8,165 7,756 5.3

Adjustments - 26 na - na - (254) na

APAT 2,042 2,002 2.0 1,991 2.5 8,165 7,502 8.8

EPS (adjusted) 7.5 7.4 2.0 7.3 2.5 30.0 27.6 8.8


Quarterly Performance Analysis

As a % of Revenue 4QFY20 4QFY19 YoY

(bps) 3QFY20

QoQ

(bps) FY20 FY19

YoY

(bps)

Material Expenses % Net

Sales 35.3 35.4 (9) 34.3 107 35.0 34.9 12

Employee Expenses % Net

Sales 8.4 6.4 202 6.7 168 7.4 6.6 77

ASP Expenses % Net Sales 14.5 13.5 97 12.5 202 13.7 12.7 105

Other Operating Expenses

% Net Sales 17.2 17.7 (53) 19.0 (175) 17.7 18.1 (43)

EBITDA Margin (%) 24.5 26.9 (237) 27.6 (301) 26.8 27.7 (92)

Tax Rate (%) 12.8 28.4 (1,561) 25.3 (1,249) 21.5 32.0 (1,050)

APAT Margin (%) 19.1 17.1 193 17.4 170 18.2 17.4 81


Revenue declined by 7%

yoy vs our estimate of flat

revenue. Volume declined

by 8%

Employee expenses were up

by 22% while ASP/other

expenses saw a decline of

1/10%.

GM was up by 9bps yoy to

64.7% (in line with our

estimates).

EBITDAM was down by

237bps to 24.5%.

Page | 3


Net Revenue Volume Growth



Gross Margin Change EBITDA Margin Change

Source: Company, HSIE Research Source: Company, HSIE Research

Employee Expense Advertising Expense

Source: Company, HSIE Research Source: Company, HSIE Research

(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

25.0

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Net Sales YoY Growth - RHS

(Rs mn) (%)

4

(12)

(3)(5)

(1)

12

4 4

7 7 5 4 4

2

(8)

(15)

(10)

(5)

-

5

10

15

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

(%)

91 76

142 108

41

130

304

255

136

(5)

(110)

(5) (2)

59

9

(210)

(100)

10

120

230

340

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

(bps)

(35)(47)(21)

183 171

286

464 436

51

127

(128)

59

(178)(105)

(237)(300)

(50)

200

450

700

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

(bps)

28

(21)

24

(8) (7)

44

(0)

0

17

4 9

5

27

14

(0)

-

2

4

6

8

10

12

14

16

(30)

-

30

60

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Advertising Gr. (%) Advertising (% of sales) - RHS

(%)

26

(1)

2

(2)

13 15

(1)

3

(7) (5)(3)

11 7 8

22

-

2.0

4.0

6.0

8.0

10.0

(25)

(10)

5

20

35

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Employee Gr. (%) Employee (% of sales) - RHS

(%)

Page | 4


Gross Margin EBITDA Margin



Colgate’s Toothpaste Market Share Colgate’s Toothbrush Market Share



63

.9

62

.6 63

.4

63

.4

65

.2

65

.7

65

.9

64

.8

65

.1

64

.6

65

.9

64

.7 6

5.7

64

.7

59.0

61.0

63.0

65.0

67.0 3

QF

Y1

7

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

(%)

24

.5

23

.5

22

.7

27

.7

27

.3

28

.2

27

.0

28

.2

28

.6

26

.9

27

.6

26

.4

27

.6

24

.5

10.0

15.0

20.0

25.0

30.0

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

(%)5

5.4

55

.1

54

.3

54

.0

53

.7

53

.4

52

.4

52

.5

52

.2

52

.2

52

.2

52

.2

52

.2 52

.7

50.0

51.0

52.0

53.0

54.0

55.0

56.0

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

(%)

43

.8

45

.8 4

6.8

46

.6

47

.0

47

.4

45

.0 45

.5

45

.1

44

.8

44

.6

44

.2

46

.6

48

.0

41.0

42.0

43.0

44.0

45.0

46.0

47.0

48.0

49.0

3Q

FY

16

4Q

FY

16

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

(%)

Page | 5


Toothpaste Market Share

Toothbrush Market Share

Per Capita Consumption

48.8 49.452.2 53.3 52.7

54.5 56.1 56.8 57.2 55.553.6 52.4

25.1 24.622.8 22.6 23.3 23.5 22.8 21.7

19.8 19.2 17.7 17.3

11.9 12.2 12.9 13.7 14.8 14.0 13.4 13.4 14.0 15.3 15.415.1

0.0 0.1 0.4 0.6 1.2 2.96.8

8.6

0.0

10.0

20.0

30.0

40.0

50.0

60.0

CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18

Colgate Competitor 1 Competitor 2 Competitor 3

(%)

33.4

38.4 38.235.9

39.841.5 43.0 44.4

47.345.1 45.2

11.4 11.914.8

17.8 18.8 18.4 18.4 17.414.6 14.2 15.2

5.9 6.4 7.2 7.2 6.7 7.5 8.0 9.3 10.7 11.0 9.9

0.0

10.0

20.0

30.0

40.0

50.0

60.0

CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18

Colgate Competitor 1 Competitor 2(%)

603

458

312

212

158

0

100

200

300

400

500

600

700

Brazil USA Philipines China India

Page | 6


Assumptions

Particulars FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E

Toothpaste revenue growth 9.0 1.6 3.7 7.4 6.8 1.1 4.3 7.6

Toothpaste volume growth 5.0 4.0 (2.0) 2.5 5.8 0.6 2.8 6.0

GM (%) 63.1 61.8 62.9 64.4 65.1 65.2 65.8 66.3

Employee (% of sales) 6.5 6.8 7.2 7.3 6.6 7.3 7.5 7.4

ASP (% of sales) 17.9 11.6 12.9 12.6 12.7 13.8 13.3 13.3

Distribution (% of sales) 3.5 3.6 3.6 3.1 3.0 3.0 3.0 3.0

Royalty (% of sales) 5.6 5.7 5.2 4.9 4.9 4.9 4.9 4.9

Other expenses (% of sales) 9.0 9.9 10.3 9.9 10.1 9.7 9.8 9.7

EBITDA Margin (%) 20.6 24.3 23.7 26.6 27.7 26.4 27.3 28.0

Tax Rate (%) 28.4 30.4 32.2 31.5 32.1 21.7 25.2 25.2


Change in Estimates

NEW OLD CHANGE (%)

FY21E FY22E FY21E FY22E FY21E FY22E

Net Sales 47,466 51,171 48,303 52,062 -1.7% -1.7%

EBITDA 12,949 14,319 13,417 14,850 -3.5% -3.6%

APAT 8,488 9,520 8,709 9,835 -2.5% -3.2%

EPS 31.2 35.0 32.0 36.1 -2.5% -3.2%

Peer Set Comparison

Company

Mcap

(Rs

bn)

CMP

(Rs/sh) Reco TP

EPS (Rs) P/E (x) EV/EBITDA (x) Core RoCE (%)

FY20E/

CY19P

FY21E/

CY20E

FY22E/

CY21E

FY20E/

CY19P

FY21E/

CY20E

FY22E/

CY21E

FY20E/

CY19P

FY21E/

CY20E

FY22E/

CY21E

FY20E/

CY19P

FY21E/

CY20E

FY22E/

CY21E

HUL 4,308 1,991 REDUCE 1,969 31.7 37.1 41.9 62.8 53.7 47.5 43.0 36.9 32.8 230.7 46.5 28.8

ITC 2,289 187 BUY 221 12.5 11.9 13.0 14.9 15.7 14.4 10.2 10.1 9.0 44.5 43.4 48.0

Nestle 1,564 16,219 REDUCE 14,042 206.0 237.6 278.2 78.7 68.2 58.3 52.3 46.9 41.0 75.0 70.7 69.1

Dabur 761 432 REDUCE 447 9.0 10.0 11.2 48.0 43.1 38.6 38.3 35.5 31.6 51.4 52.7 55.9

Britannia 764 3,180 REDUCE 2,711 56.4 61.9 71.4 56.4 51.4 44.6 41.1 37.0 32.5 41.1 43.4 47.2

GCPL 581 569 REDUCE 529 14.4 15.7 17.6 39.5 36.2 32.3 27.9 27.4 24.9 19.0 18.9 21.4

Marico 408 316 REDUCE 283 8.0 8.4 9.4 39.3 37.4 33.4 27.7 26.4 24.3 41.8 43.2 46.5

United

Spirits 427 588 ADD 586 11.9 13.7 16.1 51.4 43.0 36.5 29.3 26.7 23.3 17.9 19.1 20.8

Colgate 357 1,313 ADD 1,328 30.0 31.2 35.0 43.8 42.1 37.5 29.3 27.2 24.3 64.7 63.9 75.2

Jubilant 214 1,620 REDUCE 1,420 26.8 20.7 35.5 60.4 78.1 45.6 36.2 42.9 27.3 28.4 11.5 21.7

Emami 94 208 REDUCE 221 11.7 11.6 13.0 17.7 17.8 15.9 12.7 12.7 11.3 23.2 24.1 29.9

Radico

Khaitan 41 309 BUY 371 16.1 19.6 23.2 19.1 15.8 13.3 11.6 9.9 8.3 14.9 14.3 15.8


Page | 7


Financials Consolidated Income Statement

(Rs mn) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E

Net Revenues 39,819 38,682 39,818 41,880 44,624 45,456 47,466 51,171

Growth (%) 11.3 4.5 2.9 5.2 6.6 1.9 4.4 7.8

Material Expenses 14,677 14,766 14,763 14,901 15,586 15,729 16,032 17,038

Employee Expense 2,589 2,624 2,885 3,059 2,959 3,323 3,487 3,759

ASP Expense 7,142 4,476 5,117 5,268 5,647 6,260 6,313 6,806

Distribution Expense 1,378 1,390 1,424 1,315 1,339 1,364 1,424 1,535

Other Expenses 5,811 6,044 6,185 6,211 6,733 6,764 7,262 7,715

EBITDA 8,222 9,382 9,444 11,125 12,361 12,017 12,949 14,319

EBITDA Growth (%) 23.9 14.1 0.7 17.8 11.1 (2.8) 7.8 10.6

EBITDA Margin (%) 20.6 24.3 23.7 26.6 27.7 26.4 27.3 28.0

Depreciation 750 1,114 1,332 1,565 1,592 1,979 2,089 2,199

EBIT 7,472 8,268 8,112 9,560 10,769 10,038 10,859 12,120

Other Income (Including EO Items) 332 86 403 270 682 492 553 653

Interest - - - - 25 96 70 50

PBT 7,803 8,354 8,514 9,830 11,426 10,434 11,343 12,723

Total Tax 2,214 2,541 2,740 3,097 3,670 2,269 2,855 3,202

RPAT 5,589 5,812 5,774 6,734 7,756 8,165 8,488 9,520

Exceptional Gain/(loss) - (218) - (83) 254 - - -

Adjusted PAT 5,589 6,031 5,774 6,816 7,502 8,165 8,488 9,520

APAT Growth (%) 13.7 7.9 (4.2) 18.0 10.1 8.8 4.0 12.2

Adjusted EPS (Rs) 20.5 22.2 21.2 25.0 27.6 30.0 31.2 35.0

EPS Growth (%) 13.7 7.8 (4.2) 18.0 10.1 8.8 4.0 12.2


Consolidated Balance Sheet

(Rs mn) FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

SOURCES OF FUNDS

Share Capital - Equity 136 272 272 272 272 272 272 272

Reserves 7,567 10,038 12,466 14,974 14,196 16,105 15,420 18,952

Total Shareholders Funds 7,703 10,311 12,738 15,246 14,468 16,377 15,692 19,224

Long Term Debt - - - - 777 - - -

Short Term Debt - - - - - - - -

Total Debt - - - - 777 - - -

Net Deferred Taxes 26 400 275 355 309 50 50 50

Other Non-current Liabilities & Provns 859 196 268 209 201 1,520 1,520 1,520

TOTAL SOURCES OF FUNDS 8,588 10,906 13,281 15,811 15,754 17,947 17,263 20,795

APPLICATION OF FUNDS

Net Block 7,816 10,081 11,081 11,460 11,909 11,229 10,639 9,940

CWIP 1,412 784 1,666 1,586 1,987 1,900 1,900 1,900

Other Non-current Assets 372 1,191 1,865 1,978 1,903 2,482 3,163 3,420

Total Non-current Assets 9,599 12,056 14,612 15,024 15,798 15,611 15,703 15,260

Inventories 2,522 2,915 2,926 2,267 2,486 2,969 3,109 3,355

Debtors 696 1,015 1,299 2,010 2,098 1,326 1,384 1,492

Other Current Assets 1,270 951 1,015 1,465 1,611 1,772 1,950 2,145

Cash & Equivalents 2,916 3,198 3,255 4,873 4,271 4,797 4,867 8,973

Total Current Assets 7,405 8,080 8,494 10,615 10,466 10,864 11,309 15,965

Creditors 8,003 5,519 5,975 6,145 6,132 6,125 6,323 6,750

Other Current Liabilities & Provns 413 3,711 3,851 3,683 4,378 2,403 3,427 3,680

Total Current Liabilities 8,415 9,230 9,826 9,828 10,510 8,528 9,749 10,430

Net Current Assets (1,011) (1,150) (1,332) 788 (44) 2,337 1,560 5,534

TOTAL APPLICATION OF FUNDS 8,588 10,906 13,281 15,811 15,754 17,947 17,263 20,795


Page | 8


Consolidated Cash Flow Year End (March) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E

Reported PBT 7,804 8,595 8,514 9,947 11,426 10,434 11,343 12,723

Non-operating & EO Items 97 (52) 28 81 - 50 - -

Interest Expenses (264) (246) (292) (290) 25 96 70 50

Depreciation 750 1,114 1,332 1,565 1,592 1,979 2,089 2,199

Working Capital Change 49 155 311 (889) 620 (1,782) 284 92

Tax Paid (2,055) (2,836) (3,014) (3,474) (3,670) (2,269) (2,855) (3,202)

OPERATING CASH FLOW ( a ) 6,382 6,729 6,880 6,939 9,992 8,509 10,931 11,861

Capex (2,994) (2,713) (3,213) (2,087) (2,442) (1,213) (1,500) (1,500)

Free Cash Flow (FCF) 3,387 4,017 3,667 4,852 7,550 7,296 9,431 10,361

Investments - 70 (506) (273) - 125 - -

Non-operating Income 278 42 297 287 (312) (648) (115) (212)

INVESTING CASH FLOW ( b ) (2,716) (2,601) (3,421) (2,073) (2,754) (1,736) (1,615) (1,712)

Debt Issuance/(Repaid) - - - - 777 (777) - -

FCFE 3,665 4,128 3,458 4,866 8,016 5,996 9,316 10,149

Share Capital Issuance - - - - - - - -

Dividend (3,848) (2,987) (3,271) (3,705) (7,862) (5,241) (9,172) (5,988)

Others - (800) (135) (92) (298) (104) (73) (53)

FINANCING CASH FLOW ( c ) (3,848) (3,786) (3,406) (3,798) (7,382) (6,122) (9,246) (6,042)

NET CASH FLOW (a+b+c) (183) 342 53 1,068 (144) 651 70 4,107

EO Items, Others 127 0 (4) (550) 458 (0) 0 1

Closing Cash & Equivalents 2,545 2,887 2,943 4,562 3,960 4,611 4,681 8,787

Key Ratios Year End (March) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E

PROFITABILITY (%)

GPM 63.1 61.8 62.9 64.4 65.1 65.4 66.2 66.7

EBITDA Margin 20.6 24.3 23.7 26.6 27.7 26.4 27.3 28.0

EBIT Margin 18.8 21.4 20.4 22.8 24.1 22.1 22.9 23.7

APAT Margin 14.0 15.6 14.5 16.3 16.8 18.0 17.9 18.6

RoE 81.6 67.0 50.1 48.7 50.5 52.9 52.9 54.5

RoIC (or Core RoCE) 115.8 88.8 64.5 64.4 67.2 64.7 63.9 75.2

RoCE 72.7 63.3 49.1 47.9 48.6 49.0 48.4 50.2

EFFICIENCY

Tax Rate (%) 28.4 30.4 32.2 31.5 32.1 21.7 25.2 25.2

Fixed Asset Turnover (x) 3.1 2.5 2.2 2.1 2.0 1.9 1.9 1.9

Inventory (days) 23.1 27.5 26.8 19.8 20.3 23.8 23.9 23.9

Debtors (days) 6.4 9.6 11.9 17.5 17.2 10.6 10.6 10.6

Other Current Assets (days) 11.6 9.0 9.3 12.8 13.2 14.2 15.0 15.3

Payables (days) 73.4 52.1 54.8 53.6 50.2 49.2 48.6 48.2

Other Current Liab & Provns (days) 3.8 35.0 35.3 32.1 35.8 19.3 26.4 26.2

Cash Conversion Cycle (days) (36.0) (41.0) (42.0) (35.6) (35.3) (19.8) (25.4) (24.5)

Net D/E (x) (0.4) (0.3) (0.3) (0.3) (0.2) (0.3) (0.3) (0.5)

Interest Coverage (x) na na na na na na na na

PER SHARE DATA (Rs)

EPS 20.5 22.2 21.2 25.0 27.6 30.0 31.2 35.0

CEPS 23.3 26.2 26.1 30.8 33.4 37.3 38.9 43.1

Dividend 12.0 10.0 10.0 24.0 16.0 28.0 22.0 24.0

Book Value 28.3 37.9 46.8 56.0 53.2 60.2 57.6 70.6

VALUATION

P/E (x) 63.9 59.3 61.9 52.4 47.6 43.8 42.1 37.5

P/BV (x) 46.4 34.7 28.1 23.4 24.7 21.8 22.8 18.6

EV/EBITDA (x) 43.1 37.8 37.5 31.7 28.6 29.3 27.2 24.3

EV/Revenues (x) 8.9 9.2 8.9 8.4 7.9 7.8 7.4 6.8

OCF/EV (%) 1.8 1.9 1.9 2.0 2.8 2.4 3.1 3.4

FCF/EV (%) 1.0 1.2 1.0 1.4 2.0 1.9 2.6 2.9

FCFE/Mkt Cap (%) 1.0 1.2 1.0 1.4 2.2 1.7 2.6 2.8

Dividend Yield (%) 0.9 0.8 0.8 1.8 1.2 2.1 1.7 1.8


Page | 9


Rating Criteria

BUY: >+15% return potential

ADD: +5% to +15% return potential

REDUCE: -10% to +5% return potential

SELL: >10% Downside return potential

Date CMP Reco Target

28-May-19 1,180 NEU 1,227

9-Jul-19 1,164 NEU 1,231

18-Jul-19 1,203 NEU 1,281

22-Sep-19 1,397 NEU 1,412

11-Oct-19 1,497 NEU 1,398

25-Oct-19 1,565 NEU 1,400

9-Jan-20 1,459 NEU 1,433

31-Jan-20 1,396 NEU 1,392

2-Mar-20 1,285 ADD 1,497

13-Apr-20 1,365 ADD 1,372

14-Apr-20 1,354 ADD 1,372

22-May-20 1,313 ADD 1,328

From 2nd March 2020, we have moved to new rating system

RECOMMENDATION HISTORY

1,000

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Colgate TP

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HDFC securities

Institutional Equities

Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park,

Senapati Bapat Marg, Lower Parel, Mumbai - 400 013

Board: +91-22-6171-7330 www.hdfcsec.com

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