Motilal Oswal has given Neutral recommendation for Colgate with a target price of Rs. 1565 in its research report issued on Jul 27, 2022

Motilal Oswal’s research report on Colgate

CLGT’s 1QFY23 sales and gross profit were in line. Higher than forecasted other expenses led to an EBITDA miss. The management said 1QFY23 was impacted by a slowdown in rural India and inflationary pressures. It remains cautiously optimistic of improving trends in coming quarters.  While we await the response of re-launches/launches and the strategy under the new CEO, the core issue of lack of sales growth (caused by high category penetration, especially when allied with the fact that CLGT has not shown any signs of regaining lost market share), will continue to delay rerating of the stock, given the little signs of a shift from its dependence on Oral Care. We maintain our Neutral rating.

Outlook

With weak revenue and earnings growth likely to sustain going forward, there is unlikely to be any re-rating of the stock. We retain our target multiple of 35x FY24E EPS and roll forward to Jun’24 EPS to arrive at our TP of INR1,565 per share. We maintain our Neutral rating on the stock.

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