Colgate-Palmolive India rating: Hold | Topline remains the primary concern While we continue to like Colgate as the dominant force in the oral care segment with large scale and superior economics, value creation and multiple re-rating are very sensitive to the sustained recovery in volume growth. 1) Topline growth remains subdued: With sales growth stuck in mid-to-low-single digits, volume growth has been stubbornly weak for several quarters now. The rural slowdown has also added to structural challenges to growth. 2) Market share yet to see a revival: Despite several product launches and continued significant investment in A&P, a weak top- line suggests that Colgate is yet to begin its journey to regain lost market share. While its ‘naturals’ range of toothpaste ‘Vedshakti’ has gained traction, it still doesn’t move the needle at the aggregate level, in our view. 3) Margin-led earnings catalyst is less material now: In the absence of healthy topline growth, any prospect of an earnings rebound on margin expansion will likely be a less material catalyst for valuation re-rating and will be perceived as only a transient gain, in our view. 4) Move to expand personal care is encouraging but less material: Colgate has expanded its Palmolive brand beyond body wash to face cleansing, but still it is far from being meaningful at the topline level. 5) Implied expectations in valuation are significant: Despite CLGT underperforming its FMCG peers YTD (up 4% vs +11% in Nifty FMCG Index), its current price builds in c10% long-term earnings growth expectations, which are still significant and rich in absence of a meaningful revival in volume growth, in our view. 5) Recent launches such as Visible White O2, Palmolive face care range have been tracking well, as per management. Retain Hold: We adjust our estimates and roll-forward valuation, which leads to a lower TP of Rs 1,650 (from Rs 1,670). We maintain our Hold rating.
(The stock recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)
Analysts at Hem Securities, however, had positive views with a 鈥楽ubscribe鈥 rating. 鈥淐ompany is bringing the issue at price band of Rs 310-326 per share at p/e multiple of 21x on 9 Months FY22 EPS basis. Company with international Accreditations and product approvals is specialized in production of Stainless-Steel Pipes and Tubes with multi-fold demand of its Products & Customer Diversification.Hence we recommend 鈥淪ubscribe鈥 on issue,鈥 Hem Securities had said earlier.