Colgate-Palmolive (India) Ltd.'s better-than-expected June-quarter revenue performance prompted brokerages to raise target prices, although analysts remained divided on the stock as higher brand investments and advertising spends continued to weigh on margins.
Colgate-Palmolive (India) Q1 Results - YoY
- Net profit up 7% at Rs 343 crore vs Rs 321 crore YoY
- Revenue up 11.8% at Rs 1,603 crore vs Rs 1,434 crore YoY
- EBITDA up 6.7% at Rs 483 crore vs Rs 453 crore YoY
- EBITDA margin at 30.1% vs 31.6% YoY
The quarter was driven by robust demand for Colgate's oral care portfolio, with its toothpaste business delivering high single-digit growth. Gross margin expanded 110 basis points to 69.7%, reflecting better pricing and product mix, even as higher advertising and promotional spending weighed on operating profitability.
Following the results, Jefferies reiterated its 'Buy' rating and increased its target price to Rs 2,650 from Rs 2,600. The brokerage said the company's elevated advertising and promotion (A&P) investments reflected a clear growth mindset.
Citi maintained its 'Sell' recommendation but raised its target price to Rs 2,000 from Rs 1,900. The brokerage expects reported volume and revenue growth to remain strong in the September quarter, helped by a favourable base.
Goldman Sachs also retained its 'Sell' rating while raising its target price to Rs 2,050 from Rs 2,000. The brokerage attributed the improvement in growth largely to a low base and said EBITDA margins declined because of higher advertising spends.
Brokerages on Colgate-Palmolive (India)
Citi
- Maintain Sell; Hike target price to Rs 2,000 from Rs 1,900.
- Growth has accelerated, albeit off a low base, while margin trade-offs persist.
- Expects reported volume and revenue growth to remain strong in Q2.
- Continues to see premiumisation and incremental pricing as the key drivers of growth.
Goldman Sachs
- Maintain Sell; Hike target price to Rs 2,050 from Rs 2,000.
- Growth improvement was largely driven by a favourable base.
- EBITDA margins declined due to higher advertising spends.
- Raises FY27/FY28 EPS estimates by 1% to reflect stronger-than-expected pricing-led revenue growth.
Jefferies
- Maintain Buy; Hike target price to Rs 2,650 from Rs 2,600.
- Higher advertising and promotional (A&P) investments reflect the company's growth-focused strategy.
- Increased brand investments weighed on EBITDA margins despite improved gross profitability.
- Believes the stock trades at a meaningful discount to peers, which could narrow if growth momentum is sustained.
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