We reiterate our REDUCE call on Colgate due to a high base for growth delivery ahead. The company has executed well on oral care and consistently surprised the street with its performance. However, amid a tough demand setting now, we see price power waning which will limit margin delivery ahead and result in muted earnings. Q2 results were a miss – 10% sales growth (3% lower than our estimate) and 4% adj PAT growth (11% lower). We believe business diversification is key for double-digit growth ahead; the company could double down on personal care offerings which, though, could be margin dilutive.
OutlookAfter Q2 results and weak management commentary, we cut FY25-27E earnings 5- 8% and lower our target valuation multiple, from 50x to 47x (now at 10% premium to the last 5YF avg P/E). Our new Sep-25E TP is Rs 3,000.
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