Hold Colgate Palmolive; target of Rs 2973 Prabhudas Lilladher

Prabhudas Lilladher's research report on Colgate Palmolive

CLGT Analyst meet gave a cautious outlook in near term with slowdown in urban demand, Plateauing rural demand and peaked out margins amidst rising promotional intensity. CLGT is aiming for consistent growth adopting four key pillars of its growth strategy, which include 1) leading toothpaste category growth 2) science led premiumisation 3) lead category growth in Toothbrush and devices and 4) build personal care. CLGT continues to focus on 1) Driving toothpaste category penetration with twice a day usage in urban India 2) significantly faster growth in premium segments with superior products and new packaging in Colgate Total, Colgate MaxFresh, Active Salt and Visible white and 3) strong growth in toothbrushes with leadership in premium segments. We expect volume growth to settle to mid-single digits, with little scope of margin expansion from FY24 levels of 33.5% we estimate 9.1% EPS CAGR over FY25-27.

Outlook

We value CLGT at 48x Sep-26 EPS and assign a target of Rs2973. CLGT offers little scope of re-rating given that FY24 growth (26.9% EPS growth) is not sustainable. However, given steep correction in stock price (23% from peak) we improve our rating to Hold (reduce earlier).

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