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Dolat Capital Report
Colgate-Palmolive India Ltd.'s Q3 FY24 results were ahead of our estimate. Domestic business posted revenue growth of 8.8% YoY. We believe that the volume growth was flattish on a base of 5% de-growth.
Gross margin expanded by 630 basis points YoY due to deflation in key raw material prices. However, increase in advertising and promotion spends restricted Ebitda margins expansion at 560 bps.
Company's focus on driving growth via increasing oral care pie in India through innovation across core categories and developing new segments would remain key growth drivers over the long term. However, increase in competition and better product offerings by competitors like Dabur India Ltd. and Patanjali remains a key challenge.
Further, rural slowdown remains challenge for domestic oral care industry.
As Colgate's Q3 results were a beat, we have upward revised our FY24E earnings per share by 1.6% at Rs 46.3. However, we have broadly maintained our FY25/26E EPS at Rs 50.3/54.7.
We value the stock at 42 times FY26E EPS (15% discount to HUL) to arrive at target price of Rs 2,297. Rich valuations, Downgrade to 'Sell'.
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