While Colgate’s revenue and profit growth beat peers (price/mix +8%, volumes +2%, albeit on a low base), it's still underwhelming. At ~70% gross margin and >35% adj. EBITDA margin, it is over-earning, though the basic product (white toothpaste with the highest salience in its portfolio) is a functional product. Bringing focus back on brushing twice may drive per capita consumption though it has failed in the past to do so. Relaunches of products with superior quality, launch of access packs and expected launch of global toothpaste variants are steps in right direction. However, market share losses to naturals segment (with continuous price hikes) is a key risk. Focusing & growing core plus diversification is a tough ask. At 48x P/E FY26E, downgrade to HOLD (ADD earlier).
OutlookOur earnings estimates are unchanged, modelling in revenue / EBITDA / PAT CAGR of 8 / 8 / 9 (%) over FY24-26E. At 48x P/E FY26E, downgrade to HOLD (from ADD) with an unchanged DCF-based target price of INR 2,900. Key downside risks: Increased competitive intensity and lower than expected market share gains. Key upside risks: Higher-than-expected market share gains.
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