Colgate smiles: Turnover up 19% - Views on News from Equitymaster

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Colgate smiles: Turnover up 19%

Jan 24, 2001

Oral care major, Colgate Palmolive India, has declared an encouraging YoY 22% growth in bottomline in 3QFY01. What is even more encouraging is a 19% growth in turnover during the period. The company managed to increase its net margins by a marginal 10 basis points.

(Rs m) 3QFY00 3QFY01 Change 9m FY00 9m FY01 Change
Net Sales Turnover 2,542 3,013 18.5% 8,024 8,836 10.1%
Other income 37 50 35.1% 156 177 13.5%
Total expenditure 2,346 2,812 19.9% 7,386 8,176 10.7%
Advertising expenditure 426 649 52.3% 1,493 1,714 14.8%
Operating Profit (EBDIT) 196 201 2.6% 638 660 3.4%
Operating Profit Margin (%) 7.7% 6.7%   8.0% 7.5%  
Interest 1 0 - 1 0 -
Depreciation 62 39 -37.2% 191 132 -30.9%
Profit before Tax & extraordinary income 170 212 24.7% 602 705 17.1%
Tax 70 90 28.6% 248 273 10.1%
Profit after Tax/(Loss) 100 122 22.0% 354 432 22.0%
Net profit margin (%) 3.9% 4.0%   4.4% 4.9%  
No. of Shares (eoy) (m) 136.0 136.0   136.0 136.0  
Earnings per share*       3.5 4.2  
*(annualised)            
Current P/e ratio         42.7  

In the 1st quarter of FY01 (1QFY01), Colgate's topline and bottomline grew by 2% and 11% respectively. In 2QFY01 however, the company's numbers improved and its declared a 9% growth in topline and a significant 32% in bottomline. This however, came on the back of a huge 74% jump in other income coupled with a 30% decline in depreciation.

In light of Colgate's performance in the previous quarters in FY01, 3QFY01 numbers look more balanced. Both topline and bottomline have shown good growth. However, a 52% jump in advertising expenditure saw operating margins squeezed by 100 basis points. A 37% decline in depreciation helped the company improve its net margins.

On a nine month consolidated basis, the company has shown a 10% growth in turnover to Rs 8.8 bn. Its bottomline showed an increase of 22% during the period. The company was helped in its performance by a 14% surge in other income to Rs 177 m coupled with a 31% decline in depreciation provisioning. Other income and net profit for the nine months ended Dec. 31, 2000 includes profit of Rs. 42 m, on sale of a residential apartment.

At the current price of Rs 181, the stock trades at 43 times its annualised nine month FY01 earnings. The stock is likely to see a positive movement in light of its good turnover growth.

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