Hold Colgate Palmolive; target of Rs 2453: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Colgate Palmolive

We cut FY26/27 EPS by 7.1/7.4% given subdued urban demand, competitive pressures and little scope to increase margins from current elevated levels. CLGT 1Q26 was a miss on estimates with 4.4% revenue decline led by 2.8% volume decline (high base, subdued urban demand and intensifying competitive pressures). Near term outlook remains cautious as impact of high base, tepid urban demand, heightened competition and promotions/ discounting will continue to impact in at least 2Q also. We expect slow growth in the near term as the phase of high realization and margin growth is behind (GM and EM expansion of 470/680bps over FY20-25). Although CLGT’s long term drivers are intact led by 1) driving core toothpaste brands and 2) premiumization through science-backed innovations (driving growth in urban premium segments), however, any major acceleration in growth looks unlikely. We expect volume growth to settle at low to mid-single digits with 7-8% sustainable PAT growth in the long term.

Outlook

We estimate 2.6% EPS CAGR over FY25-27. We value CLGT at 44x March 27 EPS and assign a target of Rs2453 (Rs2528 earlier). Retain Hold.

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Colgate Palmolive - 23072025 - prabhu