15-Jan-2022

COLGATE-PALMOLIVE (INDIA) LIMITED

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DHD
Colgate-Palmolive (India) Ltd., incorporated in the year 1937, is engaged in the business of personal care and oral care products. It is
India’s leading provider of scientifically proven oral care products at various price points.
Colgate-Palmolive USA is the ultimate holding company and has 51% stake in Colgate-Palmolive India.
Its oral care range includes toothpaste, toothpowder, mouthwash, mouth spray, toothbrushes, and dental gel under the ‘Colgate’
brand. And its personal care products include a range of shower gels, shampoos, liquid hand washes, and recently launched hand
sanitizer under the 'Palmolive' brand.
It has a strong distribution network in the traditional trade channels, and its e-commerce and modern trade channels are also gaining
significant market share.
The company has four manufacturing plants in Baddi (Himachal Pradesh), Goa, Sanand (Gujarat) and Sricity (Andhra Pradesh).

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REVENUE MIX (FY21)

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 GROWTH
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DHD SALES GROWTH

In FY21, the net sales was ₹4,841 cr, a growth of 7%
YoY. It recovered its revenue performance from Q2
FY21 onwards, mainly contributed by volume growth.
In H1 FY22, net sales was ₹2,518.39 cr, a growth of
8.3% YoY.
Going forward, topline growth is likely to be driven by
new product categories, expansion of existing
brands, innovation and focus on the naturals
segment.
However, decline in rural demand may impact its
growth in the near term.

5 Year CAGR: 2.2%

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DHD EBITDA GROWTH

In FY21, EBITDA was ₹1,509.63 cr, which saw a
growth of 25.63% compared to FY20.
In H1 FY22, EBITDA was ₹755.98 cr, a growth of 5.4%
YoY.
Going forward, a continued uptick in promotional
spends may impact the EBITDA growth.

5 Year CAGR: 10.0%

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DHD PAT GROWTH

In FY21, the company reported a profit of ₹1,035.39
cr, a growth of 26.81% YoY, mainly aided by better
operating profitability.
In H1 FY22, PAT was ₹502.40 cr, a growth of 6.4% YoY.
The company’s profitability is likely to be supported
by a strong brand recall, sustained leadership in the
core portfolio and better operational efficiencies.
as

5 Year CAGR: 12.2%

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 GROWTH EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 PROFITABILITY
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DHD EBITDA MARGIN

In FY21, the EBITDA margin was 31.63%, an
expansion of 413 bps YoY.
In H1 FY21, the EBITDA margin saw a contraction
mainly due to increase in raw material costs,
advertisement spends and employee costs.
The company is likely to maintain its margins on the
back of volume growth, focus on premiumization and
new product development.
Competitive price hikes and a focus on cost
efficiencies remain monitorable.

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DHD PAT MARGIN

In FY21, the PAT margin was 21.27%, an expansion of
335 bps YoY.
In H1 FY22, PAT margin saw a contraction on a YoY
basis.

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DHD ROCE
For FY21, ROCE was 98.37% v/s 67.41% in FY20.
The metric saw an improvement on the back of
higher EBIT growth.

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DHD ROE
In FY21, the metric saw an improvement led by
higher profitability and a decline in the average net
worth of the company.

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 PROFITABILITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 EFFICIENCY
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DHD CASH FLOWS

In FY21, the company generated ₹784 cr from its
cash from operations, a decline of 15.70% YoY due to
working capital adjustments.
Cash from investing saw an inflow of ₹71 cr on
account of proceeds from current investments
amounting to ₹106 cr.
Financing activities saw an outflow of ₹976 cr mainly
on account of dividend payments of ₹921 cr.

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 EFFICIENCY
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WORKING CAPITAL CYCLE

DHD
The positive impact of working capital can be
attributed to lower debtors’ days.
Over the years, the company has done a commendable
job of improvingits working capital cycle.

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DHD FREE CASH FLOW

In FY21, the free cash flow per share was ₹28.59.
The company has not lined up any major capex
plans and is also not looking for any organic
expansion or inorganic acquisitions in the near term.
It is likely to maintain free cash flow at steady levels
on the back of decent profitability, efficient working
capital management and stringent cost control
measures.

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 EFFICIENCY
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ASSET
DHD TURNOVER RATIO
In FY21, the asset turnover ratio was 1.07x.
Over the last five years, the metric has been stable
around 1x.

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 EFFICIENCY EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 SOLVENCY
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DHD DEBT TO EQUITY

The company continues to remain debt free.

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 SOLVENCY
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INTEREST
DHD COVERAGE RATIO
The company does not have any meaningful interest
cost.

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 SOLVENCY
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DHD CURRENT RATIO

In FY21, the current ratio stood at 0.90x.
The major drivers of the current assets are cash and
bank balance and inventories.
Trade payables and other financial liabilities were
significant contributors to current liabilities.
As on 30th September 2021, the company has cash &
cash equivalents, bank balance and investments of
₹810 cr.
It has sufficient resources to meet its current
liabilities.

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 SOLVENCY EDGE METER: 5
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 VALUATION
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DHD PE RATIO
The company is currently trading at a TTM PE multiple
of 37.36x.
Despite the concerns around the growth, the
company’s leadership position in the domestic oral care
segment, strong brands, robust financial risk profile,
and product innovation are supportive of the current
valuations.

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DHD DIVIDEND YIELD

The company has an aggressive dividend payout
policy and has been consistently declaring dividends
for the last 5 years.
In FY21, the company declared the highest ever
dividend of ₹38 per share. The dividend payout for
the fiscal was 99.8%.
Recently, it declared an interim dividend of ₹19 per
share.

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 VALUATION
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DHD KEY LEVELS

Colgate-Palmolive (India) had been in a structural
uptrend since the year 2009 when it was trading
near ₹200.
In the last couple of years, the stock had been
consolidating in the range of ₹1200-₹1650. In May,
2021, the stock finally managed to rise beyond ₹1650
and thereafter has tested a high of ₹1823.
The zone of ₹1350-₹1400 is likely to act as a strong
support in the near term while on the upside the
stock is likely to move towards the ₹1900-₹2100
zone.

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 VALUATION EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 QUALITY
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DHD MANAGEMENT
The management is working towards achieving
sustainable growth with brand-building activities and
a sharp focus on innovation.
The management’s strategy is centered around:
(I) gaining market share in urban India with value-
added premium products; (II) calibrated approach to
grow Palmolive business (III) sustained investments in
promotional activities and (IV) continued efforts over
direct distribution expansion.
The management is optimistic about maintaining its
leadership position in the oral care segment and
create value for all stakeholders.

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SHAREHOLDING PATTERN
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Promoters’ stake in the company continues to
remain at 51% for the last nine quarters.
DII have decreased their stake in the company from
8.49% in Q1 FY22 to 7.70% in Q2 FY22.
FII increased their stake from 18.61% in Q1 FY22
to 19.14% in Q2 FY22.
Top Public Shareholding:-

Life Insurance Corporation of India 3.04%

SBI Magnum Global Fund 1.21%

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DHD SECTOR POTENTIAL

• According to EY India report, India is likely to become the 5th largest FMCG market by 2025, with a market size of $262
billion. According to the report, a robust ecosystem coupled with a favourable demographic is likely to drive growth in the sector.
• The penetration level of oral care products in urban areas is high compared to rural areas. Low penetration level in the rural area
provides ample headroom for the companies to grow their presence in the oral care market.
• Rural consumers are gradually shifting to toothpaste & toothbrushes over toothpowder while premium products like mouthwash,
floss and others are gaining traction in the metro and urban markets.
• Need based offerings such as whitening, sensitivity relief, freshness, and others are witnessing a sharp demand uptick. The need
base or functional categories will remain the growth drivers over the medium term.
• The oral care segment is witnessing a marked shift in consumer demand for ayurvedic and herbal toothpaste, with consumers
increasingly seeking natural value-added remedies for their oral hygiene needs.
• The growth in the industry will be driven by intelligent advertising & marketing initiatives and the premiumization trend.
• As per Nielsen, sales through e-commerce are likely to reach $4 billion by 2022.
• The disruption caused by the pandemic and consumers downtrading to smaller size packs is pushing down industry growth rates.

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COMPETITIVE LANDSCAPE
DHD
The company has been struggling with its topline
growth for the last few years. The impact was mainly
due to market share loss and increased competition in
the herbal space from players like Patanjali and Dabur.
HUL’s integration with GSK Consumer has given it
access to GSK's premium brands of toothpaste
(Sensodyne), which may challenge Colgate’s
premiumization journey.
Colgate-Palmolive India is placing greater emphasis
on freshness, whitening, therapeutic, and family
toothpastes, as rivals such as Dabur and Patanjali
dominate the growing naturals segment of the
market.

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DHD FUTURE OUTLOOK

• It aims to acquire the lost market share against ayurvedic and natural brands over the last few years through new launches,
especially in the ‘Naturals’ and ‘Vedshakti’ brands.
• Improving dental habits (both in the urban and rural areas), strong growth momentum in the ‘Naturals’ category, and sensitive
toothpaste and other new launches will be some of the key revenue drivers in the near term.
• It continues to focus on striking the right balance between volume and pricing.
• It would continue to invest behind innovation and new initiatives and is also looking to expand its Palmolive portfolio.
• The company benefits from its large ‘essential’ product portfolio and presence across the price-benefit pyramid. Thus,
helping it to capture any impact of downtrading.
• The chemist channel remains under-indexed. Management is optimistic about gaining traction through product innovations and
strategic partnerships (1mg, Pharmeasy, Apollo Pharmacy).
• The disruption caused by the pandemic is likely to impact premiumisation and delay any business plan to diversify in other home
and personal care categories.
• However, increased competitive intensity and slow category growth are the key challenges that management needs to tackle for a
meaningfulrecovery.
• Despite the challenging market conditions and unfavourable macro-economic situation, it believes that its strong financials, steady
supply chain, and superior product mix will aid to sustain growth.

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 QUALITY EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 FINAL
ABOUT EDGE
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DHD
Edge Meter Aspects Grade
Growth 3
Profitability 4
Efficiency 3
Solvency 5
Valuation 4
Quality 3
TOTAL 22

The maximum grade for a company could be 30. Any company above grade 20
is worth considering. A grade below 15 is considered to be poor.
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DHD

THANK YOU
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equity involves individual judgements, this analysis should be used for only learning enhancements and cannot be considered to
be a recommendation on any stock or sector. Our knowledge team has limited understanding and we all are learning the art and
science behind this.

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DISCLOSURES
DHD
Neither Kredent Infoedge P Ltd. nor any of its associates have any financial interest in the subject company.
Neither Kredent Infoedge P Ltd. nor any of its associates have actual/beneficial ownership of one percent or more securities of the subject company, at the end of the month
immediately preceding the date of publication of the research report or date of the public appearance.
Neither Kredent Infoedge P Ltd. nor any of its associates has, any other material conflict of interest at the time of publication of the research report or at the time of public
appearance.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation from the subject company in the past twelve months.
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company in the past twelve months.
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brokerage services from the subject company in the past twelve months.
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research report.
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