"Colgate Palmolive India (CPIL) is the country's leading oral care player with its brand 'Colgate' present across all categories of oral health. Over the years, CPIL has been consistently ranked among the top three trusted brands of the country and has developed brand equity that has made the brand, Colgate, synonymous with the toothpaste category itself. The strong volume market share (April, 2013) at 55.4 percent and 41.5 percent in toothpaste and toothbrush, respectively, justifies the dominance it commands in the respective categories. Led by CPIL's strong market position, the company has posted impressive revenue and PAT CAGR of 16.5 percent from FY08-13. We believe the oral care industry in India is poised to continue high growth led by increasing per capita consumption, increasing penetration in rural areas and premiumisation. However, the increasing competitive intensity in the segment could lead to a moderation in revenue and PAT CAGR for CPIL to 13.4 percent and 11.7 percent, respectively."
"The company's volume market share in toothpaste at 55.4 percent and toothbrush at 41.5 percent is ~2x that of its nearest competitors in both segments led by CPIL's strong brand equity and an unmatched oral care portfolio. Though HUL has been expanding its oral care portfolio to match that of CPIL, it has been unable to make any significant difference in the market leader's share. We believe that with CPIL being proactive in innovation in sub-segments and having one of the highest distribution reach, it would continue to grow at the same/higher pace than the oral care industry, thereby maintaining its market dominance."
"Though toothpaste penetration in India has increased from 56 percent (2008) to 71 percent (2012), there are still ~30 crore people using conventional ways of brushing. Being the market leader, this throws up a big untapped opportunity for CPIL. Further, with India's per capita consumption being abysmally low at 136 gm (FY12) compared to China at 277 gm and Brazil at 622 gm, we believe CPIL still has enough room to grow."
"Currently, the stock is trading at 27.5x its FY15E EPS of Rs 45.6/share, ~10 percent premium to its historic average. With strong growth in revenues and earnings at 16.5 percent CAGR (FY08-13), dominance in oral care and excellent return ratios, we believe this premium is justified. We have valued CPIL on a triangulated fair value of P/E, EV/EBITDA and DCF methodology, assigning it a target price of Rs 1365/share. Hold the stock," says ICICIdirect.com research report.
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