Shares of Colgate Palmolive surged 5.5 percent in opening trade to a record high of Rs 3,390 on July 30 after the company's all-round beat with its April-June earnings has garnered praise from across the Street. Brokerages were especially impressed with the company's better-than-expected volume growth, driven by a recovery in rural demand.
Brokerage firm Nomura remains positive over Colgate's volume growth of 6-7 percent in Q1 of FY25, more so as it topped the brokerage's expectation of a 2 percent increase.
Nuvama Institutional Equities noted that Colgate is gradually benefiting from the likely rural recovery, as the company's growth in rural markets has outpaced urban markets for the second consecutive time. Backed by the strong rural recovery, anticipates a balanced growth for Colgate in FY25 as against a pricing led growth in FY24. Likewise, the brokerage raised its price target for the stock by over 13 percent to Rs 3,745 while retaining its 'buy' rating.
Jefferies also stands impressed by Colgate's growth pickup in rural markets, driven by its strong execution. Buoyed by this, the brokerage raised its price target for the stock to Rs 3,570 while maintaining its 'buy' call on Colgate. the firm also stated that Colgate's better-than-expected Q1 results have prompted it to raise its earnings estimates for the FMCG firm for a third quarter in a row.
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Emkay Institutional Equities also stated that Colgate addressed one of its two key concerns of low-volume growth with high single-digit toothpaste volume growth in Q1FY25. However, the second concern over business diversification still remains to be solved, and in the absence of much action on that front, Emkay now sees high single-digit sales growth for Colgate over FY25-27.
Given the limited earnings visibility due to a lack of business diversification, Emkay retained its 'reduce' call on the stock, even though it raised its price target by 13 percent to Rs 2,850.
Along similar lines, Nomura also pointed at an unfavourable risk-reward for Colgate, citing that the company is entering a moderate earnings-per-stock (EPS) growth phase. On the back of those concerns, the firm retained its 'sell' rating on the stock with a price target of Rs 2,800. Despite that, Nomura raised its FY25-27 EPS targets for Colgate by 1.6-4 percent to factor in the solid Q1 results.
Colgate registered a growth of 33 percent in its consolidated net profit to Rs 364 crore in the April-June quarter of FY25. The company's net sales for the quarter came at Rs 1,485.8 crore, rising 13 percent from Rs 1314.7 crore in the year-ago period.
Moreover, its toothpaste portfolio saw double-digit growth driven by high single-digit volume growth, higher than industry rival Hindustan Unilever's mid-single-digit growth which was driven by pricing. The company's EBITDA margins also expanded 240 basis points on year to 34 percent in Q1 despite the higher investment in advertising, which was up 10 percent.
On July 29, shares of Colgate ended 1.4 percent higher at Rs 3,210 on the NSE.
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