Axis Capital: Upgrade Colgate-Palmolive to ‘add’, revised TP Rs 1,350

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Published: September 19, 2019 3:03:08 AM

The management highlighted that while the big opportunity in urban remains , the rural presents a huge opportunity. It sees transaction pricing, mix improvement and innovation as three key levers.

Colgate, Palmolive, market news, Colgate india share, Colgate sharea, Colgate Palmolive,Colgate Palmolive india, max freshStrategy for non-oral care expansion is under works; however, Colgate will continue to push/test premium personal care products in select cities/channels (REUTERS)

Our initial interaction with Colgate India’s new MD Ram Raghavan suggests a focused approach to prioritise top line growth over margin —per capita consumption, frequency of purchase and premiumization are the key growth agendas.  The strategy isn’t new, but we sense a renewed aggression (visible in our on ground checks) and see Colgate benefitting from moderation in competitive intensity from Patanjali (our channel checks suggest sharp drop in Patanjali’s business barring oral care for now). We like Ram’s clarity of thought and strategic path albeit execution remains the key; volume ramp-up and share gains are the key monitorables. Upgrade the stock to ‘add’ (from ‘reduce’) with revised TP of Rs 1,350 (from Rs1,230) as we roll over to Sept-21 and raise target multiple to 38x (from 36x).

Continue to drive per capita consumption higher, naturals remains a core focus area, strengthen core including CDC/Max Fresh; Colgate has just re-launched CDC with new formulation (with arginine) across SKUs (including LUPs) and premiumization remains a key driver.
Overall, the focus remains on driving growth through a combination of volume (drive per capita consumption and frequency of purchase) and price (judicious hikes and premiumisation).

The management highlighted that while the big opportunity in urban remains , the rural presents a huge opportunity. It sees transaction pricing, mix improvement and innovation as three key levers.

Strategy for non-oral care expansion is under works; however, Colgate will continue to push/test premium personal care products in select cities/channels. Colgate is launching India’s first black toothpaste Charcoal Clean with Bamboo charcoal and mint; it’s a premium variant priced at Rs 99 for 120 gm SKU – a shade higher vs Colgate Total.

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