Management reiterated that premiumisation and higher usage frequency will remain key drivers of growth, with premiumisation taking priority, according to brokerage notes following the analyst meet.
Colgate also indicated that revenue growth is likely to outpace profitability, as the company steps up investments in advertising and marketing to support brand building and accelerate growth.
How brokerages reacted to Colgate’s investor day
HSBC has maintained a ‘Hold’ rating on Colgate-Palmolive with a price target of ₹2,140 per share.
The brokerage said the messaging around premiumisation and usage frequency was broadly similar to earlier commentary, with the two remaining the company’s key growth drivers.
HSBC said Colgate’s premiumisation push is encouraging, but its overall growth outlook remains broadly unchanged. The brokerage also highlighted management’s indication that revenue growth would exceed profitability as marketing investments increase.
CLSA has retained its ‘Hold’ rating on Colgate with a price target of ₹2,024.
According to CLSA, Colgate indicated that its high gross margins are sustainable as the company plans to reinvest cost savings and benefits from premiumisation into advertising.
Around 60% of the company’s advertising spend is digital, with management expecting higher ad spending to support faster growth in premium products and create a virtuous cycle of brand investment and premiumisation.
However, CLSA said that easier market access is increasing competitive intensity, which could require Colgate to sustain elevated advertising spending. The brokerage also questioned whether pricing could be a more effective growth strategy.
CLSA has raised its growth and gross-margin assumptions but lowered its FY27-FY28 earnings-per-share estimates to factor in higher advertising expenditure.
Jefferies has a ‘Buy’ rating on Colgate with a price target of ₹2,650.
The brokerage said premiumisation was a key theme across Colgate’s portfolio and channels at the analyst meet, with management planning to increase its focus on the segment.
This strategy will require higher investments, which the company has already started making, Jefferies said.
While topline growth is expected to accelerate, driven by volume growth, premiumisation and pricing, margins are likely to remain range-bound as management prioritises growth, according to the brokerage.
Citi has a ‘Sell’ rating on Colgate with a price target of ₹2,000.
The brokerage highlighted management’s comments around increasing consumption opportunities across both urban and rural markets. Over the medium term, growth is expected to become more balanced across volumes, pricing and product mix.
Citi said consumption growth would be supported by improved availability and affordability of Colgate’s core brands across urban and rural markets.
Premiumisation remains another key growth driver, with the premium segment growing at around six times the pace of the overall category, according to the brokerage.
However, Citi expects earnings growth to lag revenue growth as Colgate increases brand investments. Advertising spending was stepped up in the first quarter and is expected to remain elevated.
The brokerage said the analyst meet reinforced Colgate’s focus on growth, category development and premiumisation, but highlighted the trade-off between faster growth and margin protection. As a result, Citi continues to expect modest earnings growth despite improving topline visibility.
Shares of Colgate-Palmolive India are trading 2.9% lower on Tuesday at ₹1,907.1. The stock is down 9% so far this year.
