Colgate Palmolive India' March quarter earnings did not enthuse global brokerage houses which maintained their positive view on the stock but slashed price target. The stock fell nearly a percent in the morning trade on May 28.
The consumer products company reported a 4.7 percent year-on-year growth in Q4 profit at Rs 197.6 crore on narrowing one-time loss and revenue uptick.
Revenue during the quarter increased 5.7 percent year-on-year to Rs 1,154 crore in quarter ended March 2019, driven by domestic volume growth of 5 percent (overall volume growth of 3 percent).
Operating profit margin contracted 130 bps YoY to 26.9 percent compared to the corresponding quarter last fiscal.
Global brokerage houses slashed price target after cut in earnings growth estimates, citing weakness in margin.
Brokerage: CLSA | Rating: Buy | Target: Rs 1,400 | Return: 18 percent
We maintain buy rating on the stock, but cut price target to Rs 1,400 from Rs 1,575 earlier after Q4 domestic volume growth was in-line.
Management highlighted its priority on growth over margin. The decline in market share arrested and the company is hopeful of gains ahead.
Management needs to show more aggression to drive growth. We cut EPS estimate by 3-4 percent.
Brokerage: Credit Suisse | Rating: Outperform | Target: Rs 1,450 | Return: 23 percent
We maintain outperform call on the stock, but slashed price target to Rs 1,450 from Rs 1,500 apiece.
Stabilisation of market share achieved in FY19 and the company is targeting market share gain in FY20.
We are building in a lower margin as management prioritises market share gains. We expect a turnaround in market share in FY20, followed by margin in FY21.
Volume growth was steady in the context of the FMCG slowdown, but we lower our earnings by 3-4 percent for FY20/21.
Brokerage: Citi | Rating: Neutral | Target: Rs 1,265 | Return: 7 percent
We have a neutral call on the stock but revised price target to Rs 1,265 from Rs 1,180 earlier.
We adjusted FY20-21 estimates 0-3 percent after accounting for FY19 actuals. We struggled to see how Colgate can grow significantly ahead of the category.
Domestic volume growth at 5 percent was broadly in-line with estimates.
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