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Colgate Palmolive 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Colgate Palmolive (Colgate) posted a 3.9% yoy de-growth in its bottom-line to Rs.111cr, due to a 212bp yoy contraction in OPM on account of higher advertisement expenditure, which rose by 44% on a yoy basis.

Key highlights: During 3QFY2013, Colgate posted a 13.9% yoy growth in its net sales to Rs.763cr, with volume growth estimated to be ~7% for the quarter. For 9MFY2013, the volume growth stood at 9%. The company has increased its volume market share on tooth paste to 54.5% (from 52.4% for CY2011) aided by healthy growth in flagship brands. For 3QFY2013, OPM stood at 16.9% down 212bp yoy due to a substantial 44% yoy increase in advertisement and promotional expenditure. Bottom-line fell by 4% yoy to Rs.111cr due to flat performance on the EBITDA front and higher tax outgo

Outlook and valuation: We expect Colgate to report a 15.4% CAGR in its top-line and ~17.1% CAGR in its earnings over FY2012-14E. At the current market price, the stock is trading at 30x FY2014E EPS. We see limited upside in the stock price from the current levels; hence, we maintain our Neutral rating on the stock.