Colgate Palmolive (India) Ltd. has reported a 11% rise in its net profits on a marginal sales growth of 2%. Although the company's sales volumes increased significantly, the value growth has been dampened due to stiff competition with its near competitor HLL. The absence of price increase led to flat topline growth.
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The company's bottomline growth has been boosted by improvement in operating margins and its debt free status. During the quarter the company expanded its toothpaste range by launching the all new 'Colgate-Cibaca Top' in the economy segment. The product is again facing competition from HLL's 'Aim'. The product is targeted at towns that have a population of less than 1 lakh and will help to accelerate the process of transitioning customers to more advanced oral care products.
At the current market price of Rs 193, Colgate is trading at a PER of 49 times its 1QFY01 annualised earnings with a market cap to sales ratio of 2 times. Historically the company's P/E was in the range of 50-70 times. Colgate's brand equity and ability to maintain its market share despite tough competition through frequent introduction of new products will bring re-rating in the stock in time to come.
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