Reduce Finolex Industries; target of Rs 2973 Prabhudas Lilladher

Prabhudas Lilladher recommended reduce rating on Finolex Industries with a target price of Rs 2973 in its research report dated October 24, 2024.

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October 28, 2024 / 12:48 IST

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Prabhudas Lilladher's research report on Finolex Industries

CLGT delivered double-digit revenue growth led by ~8% volume growth with broad based growth across brands and segments. Core portfolio led by Colgate MaxFresh and Colgate Strong Teeth reported strong growth supplemented by double-digit sales growth in toothbrush. However, we believe best of growth momentum is behind as 1) urban demand is showing signs of slowdown 2) promotional intensity in oral care is rising and 3) pricing gains would be limited in near term due to earlier price hikes and rising promotional intensity. We cut FY25/26/27 estimates by 4.3%/1.3%/0.8% as phase of fast margin expansion (690bps) led by higher gross margins seems coming to an end (450bps in last 4 years). CLGT continues to create growth levers with 1) driving toothpaste category penetration by twice a day usage in urban India 2) science-based innovations with Total and Colgate strong teeth and 3) build personal care portfolio in body/hand/face wash.

Outlook

We expect volume growth to settle to mid-single digits with mid to high single sales growth. We estimate 9.1% EPS CAGR over FY24-27. We value CLGT at 48x Sep-26 EPS (50x FY26 EPS earlier) and assign a target of Rs2973 (Rs3130 earlier). CLGT trades at 52x Sep-26 EPS. Retain Reduce.

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