Colgate's Q2 FY27 gross margins were maintained at 69.9%, aided by price hikes of 4-5% taken at end May'26 on certain stock keeping units of Strong Teeth, MaxFresh Blue, Visible White Purple and cost savings to mitigate input-cost inflation. However, Q2 FY27 operating profit margin contracted by a sharp 290 bps YoY/ 240 bps QoQ to 27.8% - its lowest level in more than four years. Colgate-Palmolive delivered a miss on Q2 FY27 operating margins and PAT vs consensus estimates, with in-line sales.
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Motilal Oswal Report
Systematix has slightly trimmed its FY27E-FY29E earnings per share estimates of Colgate-Palmolive Ltd. by 1-2% to factor in the Q2 miss, and build FY26-FY29E revenue/ EPS compound annual growth rate of 9%/ 8% respectively.
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The brokerage has maintained Hold rating on the stock; and rolls over valuation to September-2028E (from June-2028E) and value the stock at P/E of 32 times, in-line with its current one-year forward multiple, leading to a revised target price of Rs 1,870 vs Rs 2,080 earlier.
Systematix noted Colgate's strong brand equity, potential for mix enrichment, best-in-industry margins, and strong pricing power, but await growth stabilisation at more favourable levels going forward.
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Colgate's Operating margin falls to four-year low:
Q2 FY27 gross margins were maintained at 69.9% (+45 bps YoY, -10bps QoQ), aided by-
- price hikes of 4-5% taken at end May'26 (on certain SKUs of Strong Teeth, MaxFresh Blue, Visible White Purple) and
- cost savings to mitigate input-cost inflation.
However, Q2 FY27 OPM contracted by a sharp 290 bps YoY/ 240 bps QoQ to 27.8% - its lowest level in more than four years.
As indicated by management at the recent Investor Day 2026, advertising and promotion spend was stepped up even more sharply, by 40% YoY to constitute 18.5% of sales – the highest share of revenue going into brand investments in more than 11 years.
This indicates reinvestment of GPM accretion from cost savings to drive higher growth in premium portfolio, but is also an imperative in the current scenario of elevated competitive intensity in Systematix' view.
Q2 27 Ebitda/ PAT grew 2%/ 4% YoY respectively.
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