Colgate shares surged over 6% in trade to hit a fresh record high of Rs 3,413.75 after the company’s Q1 net profit surged 33% to Rs 364 crore from Rs 273.3 crore. Brokerages too turned bullish on the Colgate stock post its Q1 results and raised the target price for the shares.
CLSA upgraded Colgate to hold and raised the target price to Rs 3,157. They noted that Q1 sales were 3% above estimates and EBITDA was 2% above expectations. Toothpaste volume growth of high single digits surpassed the estimate of around 6%. CLSA highlighted that Colgate’s sales growth was driven by investments in superior product development, brand building, and innovation, with rural areas growing faster than urban for the second consecutive quarter.
BoFA Securities upgraded Colgate to underperform with a target price of Rs 3,175, noting that Q1 results were ahead of expectations. They suggested that the margin trajectory could normalize and that the medium-term upside potential was already priced in. BoFA observed that while Q1 performance was strong even last year, growth rates normalized subsequently.
Nomura maintained a sell rating with a target price of Rs 2,800. They acknowledged an all-round beat with Q1 volume growth of 6-7% versus an estimate of around 2%. Strong gross profit margin and operating profit margin expansion drove 22% EBITDA growth. Nomura increased FY25F/26F/27F EPS by 4.0%/2.8%/1.6% to account for the Q1 beat but expressed concerns over the risk-reward ratio, citing a moderate EPS growth phase of 10% CAGR over FY24-27F compared to 26% year-on-year growth in FY24 on rich valuations.
Jefferies maintained a buy rating and raised the target price to Rs 3,570. They attributed Colgate’s impressive revenue growth and high-single-digit volume growth in Q1 to a combination of macro factors, such as a pick-up in rural markets and strong execution. Higher than expected gross margins and operating leverage benefits led to earnings well ahead of estimates, prompting Jefferies to upgrade earnings estimates for the third consecutive quarter.
HSBC rated Colgate as a hold with a target price of Rs 3,000. They noted that the stock’s impressive run-up was likely due to revenue growth, margin reset, and increased market defensiveness. Q1 results stood out with high-single-digit volume growth and significant beats on revenue and profits, but HSBC sees limited upside due to rich valuations.
