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Colgate – Shining smile - Views on News from Equitymaster
 
 
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  • Jun 8, 2000

    Colgate – Shining smile

    In the last three years, Colgate Palmolive (India) Limited has gone through the tough period. The company had lost its market share and became a slow mover stock for investors. The company has suffered due to lack of aggression, lack of diversification and lack of innovation in the past.

    However once again the company is becoming a favourite among investors at an attractive valuation due to aggressive strategies adopted by it to fight back the competition. It has the vision of becoming an innovative leader with brands “every day in every home”.

    Colgate worldwide is a $9.1 bn company serving in more than 200 countries and territories. It operates in five core categories of oral care, personal care, household surface care, fabric care and pet nutrition. Internationally the leading brands of the company include Colgate, Palmolive, Mennen, Softsoap, Protex, Sorriso, Kolynos, Ajax, Axion, Soupline, Suavitel and Fab. Colgate worldwide operates on a strong global growth, building market leadership and increasing profitability. ‘Colgate Total ‘ is number one brand in US.

    Colgate India is one of the most important countries for Colgate as it accounts for more than $350 m or about 20% of total Colgate revenues in the sub-continent. Colgate India is seen as one of the most potential and big markets for Colgate worldwide.

    Colgate the leader
    Colgate is the No.1 brand in India across categories for 7 out of 8 years as per the survey conducted by A&M-Org-Marg. The company is also leader across all the categories of oral care.

    • No.1 in Toothpaste
    • No.1 in Toothbrushes
    • No.1 in Toothpowder
    • No.1 in Shaving Cream
    • Colgate Dental Cream is the best distributed brand in India.

    Colgate’s this achievements will help certainly thwart the one way lead taken by HLL.

    Colgate is adopting advanced technology across all product categories. The company is leveraging on its parent’s global technology to develop new products with local consumer insights. Continuous product innovation, speed to market, driving cost out of supply chain and e-commerce will help the company in delivering enhanced shareholder value. These efforts would also go a long way in re-building the company.

    Valuations
    Colgate currently, quotes at P/E of 46 times its FY2000 earnings with a market cap to sales ratio of 2 times. Worldwide Colgate Company gets a P/E of 36 on a market cap to sales ratio of 3.8 times. Investors perception about the stock is likely to change gradually due to improved financial performance and aggressive strategies implemented by the company. The stock is all set for re-rating from its current price.

     

     

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