Buy Colgate Palmolive, target of Rs 498: PINC Research
PINC Research has initiated a buy rating on Colgate Palmolive (India) with a price target of Rs 498 in its April 13, 2009 research report.
“We expect CPIL to post a revenue growth of 19% to Rs 17.5 billion in FY09 driven by healthy volume growth along with steadily rising market shares. OPM should expand by 200 bps as advertisement and sales promotion spends are lower due to a slower pace of new launches. Accordingly, operating profits should rise by 33% to Rs 3.3 billion. Net profits are expected to show a 16.3% growth to Rs 2.7 billion as tax benefits from the Baddi plant begin to supplement earnings growth.
In FY10, net sales are likely to witness a growth of 13.9% to Rs 20 billion led by prudent price hikes coupled with increased penetration of oral care products. Margins are expected to expand by 60 bps to 19.5% backed by a moderation in raw material and packaging costs. While operating profits should rise by 17.4% to Rs 3.9 billion, net profits are expected to grow by 18.6% to Rs 3.3 billion.
CPIL has exhibited earnings visibility in the face of an economic slowdown thus demonstrating strong brand equity. Furthermore, a moderation in sorbitol prices would enhance margins together with benefits accruing from the Baddi plant reducing tax costs. Hence, we initiate coverage on the stock with a BUY rating and a 12-month price target of Rs 498″, says PINC Research’s report.
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