Reduce Colgate-Palmolive (India); target of Rs 1515: Sharekhan

Sharekhan's research report on Colgate-Palmolive (India)

Colgate Palmolive (India) Limited’s (Colgate’s) Q4FY2023 performance was better than our as well as street’s expectation, with revenue growing by 3.7% (domestic business grew by 6%); OPM expanding by 46 bps to 33.5%; PBT growing by 9% y-o-y. Colgate’s revenue reported a muted CAGR of low single-digit over FY2016-FY2023. Management hopes for high single-digit growth with revamped strategies, focus on improving per capita consumption, and premiumisation to drive growth. OPM is expected to expand moderately in FY2024, as the company will be spending more on advertisements on the relaunch of core products and premium brands.

Outlook

We expect Colgate’s revenue and PAT to register a CAGR of just 6.8% and 7%, respectively, over FY2023-FY2025. The stock is trading at 40x/37x its FY2024E/25E EPS. We maintain our Reduce rating on the stock with a revised PT of Rs. 1,515.