Colgate-Palmolive Q2 Review: A Detailed Analysis
Colgate-Palmolive (India) Ltd. reported a 17% year-on-year decline in net profit to Rs 327.50 crore for the quarter ended September. Revenue dropped 6.2% to Rs 1,519.50 crore, while Ebitda fell 6% with margins contracting slightly to 30.6%. Following the subdued performance, brokerages including Citi, Investec, and Jefferies revised their target prices, with mixed outlooks on the company’s near-term growth prospects.
Revenue for the quarter stood at Rs 1,519.50 crore, down 6.2% from Rs 1,619.11 crore in the corresponding quarter last year. Net profit declined 17% to Rs 327.50 crore from Rs 395.05 crore. Ebitda fell 6% to Rs 465.43 crore, with margins contracting to 30.6% from 30.7% in the year-ago quarter.
Brokerage Views
Brokerages have turned bearish on the stock, citing the company’s subdued performance. Citi maintained a ‘Sell’ rating and cut the target price to Rs 2,100 from Rs 2,175, citing a weak Q2 performance and a tough operating environment. Investec also maintained a ‘Sell’ rating and cut the target price to Rs 2,279 from Rs 2,366, citing subdued performance and pressure on EBITDA margins.
Jefferies, however, maintained a ‘Buy’ rating with a target price of Rs 2,700, citing an expectedly weak quarter due to transitory issues related to the GST rate cut. The brokerage cut EPS estimates by 4-5% and expects the stock to stay rangebound until there is a growth pickup.
For investors looking to invest in the stock market, it’s essential to keep an eye on the company’s future performance and any changes in the brokerage views. A detailed analysis of the Q2 results and the company’s growth prospects can help investors make informed decisions.
Dividend Announcement
Notably, Colgate announced a first interim dividend of Rs 24 per equity share for the fiscal 2026. The company announced a distribution of nearly Rs 652.8 crore to shareholders. This move is expected to boost investor sentiment and provide a dividend yield to shareholders.
Industry Trends
The fast-moving consumer goods (FMCG) sector has been facing challenges due to the GST rate cut and a high base. The sector’s growth has been impacted by the GST rate cut, which has led to destocking across the value chain. However, the premium portfolio of Colgate-Palmolive performed well, according to the management.
The company’s growth trajectory is expected to improve gradually, driven by the LUP structure, which is likely to offer a near-term boost to volumes. However, the consumer behavior may shift towards reduced purchase frequency rather than heightened consumption, which could impact the company’s growth prospects.
Valuation
The stock is trading at 41 times its one-year forward consensus P/E, which is considered unfavourable. The risk-reward ratio is not in favour of the stock, and investors should exercise caution while investing in the stock.
In conclusion, Colgate-Palmolive’s Q2 performance was subdued, and brokerages have turned bearish on the stock. Investors should keep an eye on the company’s future performance and any changes in the brokerage views. A detailed analysis of the Q2 results and the company’s growth prospects can help investors make informed decisions. For more information on stock market news and Indian stock market trends, please visit our website.
