Neutral Colgate; target of Rs 2400: Motilal Oswal

Neutral

Motilal Oswal's research report on Colgate

Colgate (CLGT) delivered a healthy price-led 8% YoY revenue growth (est. 6%). However, overall volumes experienced a marginal decline (est. +2%). The value growth of toothpaste was in double-digits, while toothbrushes posted YoY decline (weak volume, unfavorable mix). Volume growth for toothpaste was flat to positive. Despite numerous product innovations and marketing efforts, the rebound in volume remains uninspiring. The divergence between naturals and traditional oral care products was negligible industry-wide. Despite oral care being less price-sensitive compared to other categories, CLGT implemented a price hike, particularly in the premium segment, by the end of 2QFY24 (mainly in premium) in this market environment.

Outlook

The recent rally captures the near-term triggers and valuation at 50.5x and 46.6x of P/E on FY25/FY26 does not offer room for valuation play. We maintain our NEUTRAL rating on the stock.

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Colgate - 23012024 - moti