Hold Colgate Palmolive India; target of Rs 3555: Sharekhan

Sharekhan's research report on Colgate Palmolive India

Colgate-Palmolive (India)’s (Colgate’s) Q2FY2025 numbers were mixed with revenue coming in line with expectations, while margins missed mark owing to higher advertising spends. Revenue grew by 10% y-o-y while OPM fell by 206 bps y-o-y leading to lower PAT growth at 3.9% y-o-y. Toothpaste delivered another quarter of high single-digit volume growth driven by core brands, while toothbrush segment continued to grow in double digits led by premiumisation. Higher ad spends (up by ~18% y-o-y) dented OPM, which came in at 30.7% versus expectation of ~34%.

Outlook

The stock trades at premium valuations of 59x/53x/47x its FY2025E/FY2026E/FY2027E earnings, respectively. With an unfavourable risk-reward ratio, we maintain a Hold with an unchanged PT of Rs. 3,555.

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