Prabhudas Lilladher's research report on Colgate Palmolive
CLGT delivered yet another strong quarter with pick up in volumes resulting in ~8% toothpaste volume growth and double-digit sales growth across all segments. 220bps expansion in Gross margins and 40bps decline in Ad spends resulted in 240bps expansion in EBIDTA margins to 34%. Core portfolio led by Colgate strong teeth, Active salt and total reported strong growth supplemented by double-digit sales growth in toothbrush after several quarters. Incremental pricing actions remained limited in view of benign pricing which helped improve consumer value. We increase our FY25/26/27 estimates by 5.5%/4%/4.6% on pick up in volumes led by rural demand revival, low volume base and benefit of benign raw materials. CLGT continues to focus on 1) driving toothpaste category penetration and twice a day usage in urban India 2) science-based innovations with Total and Colgate strong teeth 3) build personal care portfolio in body/hand/face wash and 4) increasing usage of toothbrush by reducing the replacement cycle. We expect margin expansion to slow down in coming quarters given base of 32.8, 33.6 and 35.7 in 2Q/3Q/4Q versus 31.6% in 1Q25.
Outlook
We estimate 10.2% EPS CAGR over FY24-26. We value CLGT at 45x FY26 EPS (42x earlier) and assign a target of Rs2743 (Rs2414 earlier). CLGT trades at 52.7x Jun-26 EPS. Retain Reduce.
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