Hold Colgate Palmolive; target of Rs 2534: Prabhudas Lilladher

Prabhudas Lilladher's research report on Colgate Palmolive

CLGT 2Q26 was mixed with slight miss on revenue as sales remained impacted amidst GST rationalization, sustained competition and urban demand pressure at mass end of the market. However, 80bps GM expansion resulted in PAT beat as stable RM and price increase of previous quarter came in handy. Near-term outlook remains cautiously optimistic led by expected demand pickup amidst GST 2.0 and favorable macro environment 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, heightened competitive pressure remains a key concern. While GST 2.0 might provide some initial volume uptick on a low base from 3Q/4Q26 onwards, we expect volume growth to settle at mid-single digits with 7-8% sustainable PAT growth in the long term given little scope to expand margins from current elevated levels.

Outlook

We estimate 8.4% EPS CAGR over FY26-28. We value CLGT at 44x sept27 EPS and assign a target of Rs 2534 (Rs2453 earlier on Mar27 EPS). Retain Hold.