Colgate's performance drew mixed views from brokerages, with Jefferies maintaining a Buy rating while Citi and Goldman Sachs retained Sell recommendations after the FMCG company announced its September quarter results. All three brokerages cut their target prices, indicating concerns over underlying growth, margin pressure from higher advertising spend, and the sustainability of the company's growth investments.
Q2 Results Key Highlights
- Net profit rose 4.3% YoY to Rs 341.57 crore from Rs 327.51 crore.
- Net sales increased 12.2% YoY to Rs 1,691.57 crore from Rs 1,507.24 crore.
- Net profit grew 5.5% YoY after excluding one-offs and exceptional items.
Citi: Maintains Sell, Cuts Target Price To Rs 1,575
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Citi maintained its Sell rating on Colgate but cut its target price to Rs 1,575 from Rs 2,000.
- Brokerage pointed at the underlying growth being modest.
- Reinvestment continues to weigh on margins.
- Citi will continue to monitor whether increased investments translate into sustained volume growth and category development.
Goldman Sachs: Maintains Sell, Cuts Target Price To Rs 1,800
Goldman Sachs maintained its Sell rating on Colgate and reduced its target price to Rs 1,800 from Rs 2,050.
- GS indicated that Colgate's Ebitda margin for the September quarter came in below estimates.
- Revenue growth was in double digits, but due to a very weak base.
- Higher advertising spend weighed on Ebitda margins.
Jefferies: Maintains Buy, Cuts Target Price To Rs 2,000
Jefferies maintained its Buy rating on Colgate but cut its target price to Rs 2,000 from Rs 2,650.
- Jefferies described the performance as lacklustre, despite reported double-digit topline growth, partly supported by the GST transition base.
- Brand investments continued to rise, with advertising spend reaching 19% of revenue, a multi-quarter high.
- While the higher spending reflects continued growth interventions, it weighed on Ebitda margins.
- The new CEO expects strong growth ahead, supported by a science-backed portfolio and continued investments.
What Should Investors Track?
The key monitorable for Colgate is whether higher advertising and brand investments translate into sustained volume growth and category development. While Jefferies remains positive on the company's growth prospects under the new CEO, the Sell ratings from Citi and Goldman Sachs highlight concerns around modest underlying growth and margin pressure.
All three brokerages have lowered their target prices, signalling a more cautious assessment of Colgate's near-term prospects.
Also Read: Colgate Q2 Results: Net Profit Rises 4%, Sales Jump 12%; Rs 24 Dividend Declared
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