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ICICI Direct Report
Colgate Palmolive India Ltd. reported a strong performance with a 196 basis points expansion in operating margins and 17.2% growth in earnings.
Revenues saw a 4.1% decline in sales with toothpaste growth remaining resilient. However, a dip in sales was largely in the toothbrush category, which is relatively discretionary.
The impact of lockdown was minimal given consumer stocking and trade pipelines in toothpaste are relatively higher, which would have mostly filled the gap between halt and resumption of manufacturing.
We believe the trade pipeline is back (or higher) to pre-Covid-19 levels by the end of June 2020.The company maintained gross margins helped by stable commodity prices.
Further, a reduction in advertisement and promotion spends by 300 basis points (as percentage to sales) led to operating margin expansion of 196 basis points to 29.6%. Net profit grew 17.2% aided by reduction in corporate tax rate last year.
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