Colgate-Palmolive

Message

   Quoting from UBS report

UBS Investment Research

 Colgate-Palmolive India

 Brand power reaffirmed

 􀂄 Event: Colgate #1 in The Economic Times’ Brand Equity Survey 2011

 Colgate has emerged as the most trusted brand by Indians in The Economic Times’ India’s most trusted brands survey 2011. This is after four years of being in the #2 position. According to AC Nielsen, Colgate has a ~52% market share in the Indiantoothpaste market with product offerings across price points.

 􀂄 Impact: reaffirming its dominance

 We believe any competition in the oral care category will not pose a significantthreat to Colgate in the long term. We believe any new competitor would likelytake market share from local brands rather than the market leader given Colgate’s dominance. Any serious competition would be met with increase in ad spend,which could affect quarterly profitability—presenting an attractive opportunity forthe stock, in our view. Colgate has the best brand equity of all brands, which

should enable it to remain market leader.

 􀂄 Potential launches from parent portfolio

 To leverage its market presence and de-risk its Indian portfolio, we expect productlaunches from the parent’s portfolio. This, in our view, will be a key trigger for

 stock price performance. We have an anti-consensus Buy rating on Colgate as webelieve it will benefit from: 1) consumer upgrades; 2) high market growth

 opportunity; 3) a strong distribution network; and 4) powerful brand equity.

 􀂄 Valuation: maintain Buy with price target of Rs1,250

 We derive our price target from a DCF-based methodology and explicitly forecastlong-term valuation drivers using UBS’s VCAM tool. We assume a WACC of11% and a beta of 0.55.