Colgate-Palmolive (India) Ltd. share price target

Colgate (CLGT) delivered a 13% YoY revenue growth to INR15b (est. INR14.4b) in 1QFY25. Volume growth spiked at a high-single digit (flattish in the previous four quarters).

With a limited upside potential from the CMP, we ascribe a HOLD rating to the stock.

While Colgate’s revenue and profit growth beat peers (price/mix +8%, volumes +2%, albeit on a low base), it's still underwhelming. At ~70% gross margin and >35% adj. EBITDA margin, it is over-earning, though the basic product (white toothpaste with the highest salience in its portfolio) is a functional product.

Our SELL call on Colgate has been a factor of limited visibility on earnings over
the medium term, given that high margin gets into the base and structural
growth remain elusive.

Recommendation With a limited upside potential from the CMP, we ascribe a HOLD rating on the stock.

2QFY24 revenue growth was below our and consensus estimates but PAT was above estimates driven by higher other income. Colgate reported domestic revenue growth of ~7% (high-single digit growth in toothpaste portfolio), which appears to be driven by balanced volume and price/mix growth.

Pricing Led the Growth: Q2FY24 results were ahead of our estimates. The company's revenue grew by 6.1% YoY (Domestic sales grew by 6.6%), while volume stood flat