Colgate Palmolive has been given a cautious outlook by Prabhudas Lilladher due to a slowdown in urban demand and stagnant rural demand. Margins have reached their peak due to increased promotional activities.
The company's focus is on four key growth strategies:
Colgate aims to increase penetration in the toothpaste market by encouraging twice-daily usage in urban areas and experiencing significant growth in premium segments through innovative products and packaging. Toothbrush sales, especially in premium categories, are also showing strong growth. Volume growth is expected to stabilize in the mid-single digits, with limited margin expansion anticipated from the current FY24 levels of 33.5%.
Prabhudas Lilladher has set a target price of Rs 2973 for Colgate Palmolive, valuing the company at 48 times its September 2026 earnings per share. Despite a projected 26.9% EPS growth for FY24, the firm believes this rate is not sustainable, resulting in an improved rating of "Hold" after a 23% correction in the stock price from its peak.