Colgate-Palmolive Q1 Results Review - Volume Print Improves; Margin, Valuations Peak: Motilal Oswal

Motilal Oswal Report

Colgate-Palmolive India Ltd. delivered a 13% YoY revenue growth to Rs 15 billion (estiamte Rs 14.4 billion) in Q1 FY25. Volume growth spiked at a high-single digit (flattish in the previous four quarters). The rural market continued to display positive signs of demand recovery, and it is growing ahead of urban. HUL reported mid-single digit revenue growth in oral care in Q1 FY25.

Gross margin continued to expand, up 220 basis points YoY to 70.6%, aided by moderating raw material prices, cost savings, and price-led growth. In line with the industry trend, advertising and promotion spending was high at 10% YoY. Despite this, Ebitda margin expanded 240 bp YoY to 34%. Ebitda jumped 22% YoY to Rs 5.1 billion.

Product innovations and marketing efforts have enabled Colage to achieve volume growth in Q1 FY25. While price hikes have contributed to overall growth in FY24, the positive volume trend indicates a promising outlook. It will be important to monitor if this momentum sustains throughout FY25. 

The personal care portfolio is under-indexed; we would like to see if Coalge can boost this portfolio. We believe it will be challenging for Colgate to expand its operating margin level. The current valuations at 56 times/52 times price/earning on FY25E/ FY26E capture most of the near-term triggers.

We reiterate our Neutral rating on the stock with a target price of Rs 3,150 (based on 50 times June-26E EPS).

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