Colgate Palmolive share price rises after Q2 results; should you buy, sell or hold the stock?

Colgate Palmolive share price rose over a percent in early trade on Friday after the company reported its financial results for the second quarter of financial year 2023-2024. Colgate share price gained as much as 1.29% to ₹2,058.85 apiece on the BSE.

Colgate Palmolive (India) reported a consolidated net profit of ₹340.05 crore for the second quarter of FY24, registering a growth of 22.31% from ₹278.02 crore in the year-ago period.

The company’s revenue from operations in Q2FY24 rose 6.09% to ₹1,462.38 crore from ₹1,378.37 crore, YoY. The company’s volume growth for the quarter remained muted, which was below most analysts’ estimates.

At the operational level, earnings before interest, tax, depreciation and amortization (EBITDA) during the quarter increased to ₹482.2 crore from ₹408 crore in the year ago period. EBITDA margin expanded to 32.8% as against 29.4% in Q2FY23.

The company also announced a first interim dividend of ₹22 per equity share to be disbursed starting November 21, 2023.

Read here: Colgate Palmolive Q2 Results. Profit jumps 22.3% at ₹340 crore

Despite growth in net profit and revenue, the company’s toothpaste category volume growth has been flattish or marginally lower YoY in Q2FY24.

Here’s what brokerages have to say on Colgate Palmolive Q2 results and shares:

Motilal Oswal Financial Services

Motilal Oswal Financial Services noted that the company’s overall growth seems stagnant, due to the muted volume growth going forward. Additionally, due to high oral care penetration and competition from herbal players, Colgate Palmolive (India) has struggled to achieve volume growth for several years. Moreover, premiumization in general trade and traction in personal care have been slow.

Given the likelihood of continued weak topline and earnings growth in the future, it is unlikely that the stock will undergo a re-rating, the brokerage said. It maintained a ‘Neutral’ rating on the stock with a target price of ₹2,020 per share.

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Antique Stock Broking

Colgate Palmolive India’s Q2FY24 performance was below Antique Stock Broking’s expectations with volume remaining flat. The domestic business grew 6.6% driven by high single-digit growth in the toothpaste category on a weak base. 

“Contrary to our expectations, after witnessing an uptick in volume during 1Q, the demand momentum moderated in 2Q. Profitability was ahead of our expectations due to pricing actions, receding raw material price inflation, and lower overheads,” said the brokerage firm.

Antique Stock Broking expects the company to deliver sales and earnings CAGR of 8% and 11% over FY23–FY26. 

According to the brokerage, consistent recovery in volume growth and market share improvement would be the key catalyst for re-rating. 

It believes that at current valuations, Colgate Palmolive (India) offers limited upside. It maintained a ‘Hold’ rating on the stock and raised the target price to ₹2,036 per share from ₹1,987 previously.

Also Read: Asian Paints share price drops almost 1% post Q2 results; should you buy, sell or hold the stock?

Nuvama Institutional Equities

Colgate reported decent Q2FY24 numbers with EBITDA and PAT ahead of Nuvama Institutional Equities’ and Street estimates; while revenue was in line. Domestic sales increased 6.6% YoY, with toothpaste witnessing high single-digit growth. 

Nuvama Institutional Equities estimates toothpaste volumes to be flattish YoY. It maintained a ‘Buy’ call on the stock and raised the target price to ₹2,360 per share from ₹2,300 earlier.

At 9:45 am, Colgate Palmolive (India) shares were trading 0.24% higher at ₹2,037.35 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.