Colgate-Palmolive shares fell over 2% on Tuesday as brokerages remained cautious on the stock, pointing to a near-term trade-off between growth investments and margins.
The stock fell as much as 2.63% to Rs 1,913.20 apiece on the BSE. At 9:24 am, it was down 2.22% at Rs 1,921.40, while the benchmark Sensex was trading 0.29% lower at 77,505.
ALSO READ: Colgate India Q1: Bigger Growth, Thinner Margins? What Citi, Goldman Sachs, JPMorgan See
Goldman Sachs retained its Sell rating on Colgate-Palmolive with a target price of Rs 2,050. The brokerage expects the company's sales growth to be driven by a combination of premiumisation and higher consumption, including gradual changes in consumer behaviour around brushing frequency.
GS said premiumisation remains Colgate's most important growth vector, with the company stepping up innovation and marketing spends. While the company is expected to defend gross margins within a range, higher advertising spends could weigh on EBITDA in the near term. GS also sees limited visibility on portfolio expansion beyond toothpaste.
Citi also maintained its Sell rating with a Rs 2,000 target price, saying Colgate has major headroom to expand oral-care consumption. It expects growth to become more balanced across volume, pricing and product mix, with greater availability and affordability helping drive consumption.
However, Citi said Colgate is prioritising growth over near-term margin expansion, while premiumisation remains the key engine for growth.
JPMorgan retained its Neutral rating with a Rs 2,250 target price. It said premiumisation is taking centre stage and remains the biggest growth lever for Colgate, but added that growth is likely to take precedence over margins, with profitability expected to moderate in the near term.
ALSO READ: Axis Bank In, IT Services Stays Out: Check Citi's New Bets After Better-Than-Expected Q1 Earnings
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
