Colgate Palmolive - India Smiling

[Arka]

The company has received a Transfer Pricing Order from the Income Tax Authority for the Assessment Year 2021-22.

They have received a Transfer Pricing Order from the Income Tax Authority for the Assessment Year 2021-22. This order pertains to international transactions and disallows certain aspects, with an associated income tax liability of INR 170 Crores. The company has stated that this order has no quantifiable impact on its financial, operational, or other activities, and they are awaiting the completion of Draft Assessment proceedings before making an application to the Dispute Resolution Panel.

[binboxx]

Colgate Palmolive Inda has been decreasing the number of manpower across India. They are reducing the number of their sales staff and giving more area to the same staffs. They are facing some challenges in achieving their monthly targets across. Also, I heard only two branch managers are operatng instead of four.

[ranvir]

Colgate Palmolive -

Q4 and FY 25 results and concall highlights -

Q4 outcomes -

Revenues - 1463 vs 1490 cr, down 2 pc ( volumes in Q4 were flat YoY )
Gross margins @ 70.4 vs 69.1 pc
EBITDA - 498 vs 532 cr ( margins @ 34 vs 36 pc )
Brand investments - 176 cr @ 12.4 pc of sales
PAT - 355 vs 380 cr, down 7 pc

FY 25 outcomes -

Revenues - 6040 vs 5680 cr ( toothpaste volumes grew in mid single digits )
Gross margins @ 69.7 vs 69.5 pc
EBITDA - 1958 vs 1901 cr ( margins @ 32 vs 33 pc )
Brand investments - 822 cr @ 13.7 pc of sales
PAT - 1437 vs 1324 cr

Pillars for future growth -

Premiumisation
Focus on growing Toothbrushes and Devices
Building personal care portfolio

Colgate Purple ( a whitening toothpaste ) and Colgate Lemonfresh are doing exceedingly well ( both are recent product innovations )

Colgate is the most advertised FMCG brand in India

In India, ppl change 1.2 toothbrushes / yr vs a global avg of 4 changes - indicating significant under penetration

Poor / Sluggish demand trends continue in Urban India ( except for the premium portfolio ). Rural India continued to show descent demand uptick

Relaunched Colgate Strong teeth in Q4 ( mostly a rural focussed brand ) - seeing good customer acceptance

Colgate Max Fresh continues to be their fastest growing brand

76 pc of all tooth brushes sold in India are priced below Rs 40. This also offers significant room for premiumisation

Have launched a range of new products in the body wash + hand wash category under the Palmolive brand. Company has a big product / brand portfolio of choose from their parent’s global operations. Only a matter of time before they start launching them in India ( brands like - Protex, Meridol, Sanex, Axion, Soupline etc )

FY 25 witnesses modest cost inflation. Healthy margins in FY 25 were mostly driven by cost savings as the company did not resort to any price hikes

Have launched Whitening Pen in India in FY 25 ( in consultation with doctors / dentists )

Company believes they have an opportunity to build a full portfolio addressing the therapeutic area of the mkt ( addressing gum health / sensitivity issues / other dental problems )

Company is over indexed on rural India - which is a good thing ( as rural growth rates are holding up ). Once the lower half of Urban consumption picks up, company should be back to good shape again

Disc: initiated a tracking position, its a trading bet ( because of recent fall in stock price ), not SEBI registered, not a buy/sell recommendation

[Paulbiplab]

Selecting a consumer durable company is always a risk as fundamentals are quite skewed. Take Colgate for example - the stock is trading at 37.5 times the book value but the volumes are not that much. Sales is meandering at around 6% for last 5-6 years. But the company is debt free, has high ROE and dividend payout is quite good. The stock price is also flat for last 3-4 years. I am unable to gauge what ails the company.
If I need to chose between Colgate, P&G & Dabur what would be the best bet?

[dineshkr.iitk]

While the company has best margins among the FMCG peers and solid free cash-flow year-after-year, what ails this otherwise strong company is lack of growth triggers. With the oral care tooth-paste market already reaching a saturation level, with penetration north of 95%, there are no visible growth levers for the company. It has recently started emphasizing on premiumization and getting to change personal hygiene of general populace, by way of encouraging them through advertisements to brush twice, we all would agree, such change at societal level are slow to happen. No wonder, in last about a decade, revenue CAGR has been close to 4% for COLPAL.

Current FY, given the results of 2 quarters, the revenue will likely fall for the full FY compared to previous FY. No wonder, even though the stock is currently trading at historically one of its low valuations of 45 multiple of FY26E PAT, in terms of time cost of money the stock looks pricy.