Colgate-Palmolive Shares Hit Record As Rural Demand Aids Q1 Profit Beat

Shares of Colgate-Palmolive (India) Ltd. hit a record high on Tuesday after its profit rose in the first quarter, beating analysts' estimates aided by higher demand for its personal care products.

Citi Research and Jefferies India Pvt. both shared notes with positive outlook following the company's June quarter earnings. The brokerages' optimism stems from continued growth in rural markets seen by the company, and investments in its campaigns and products.

The net profit of the namesake toothpaste-maker increased 33% over the previous year to Rs 364 crore in the April-June quarter, according to an exchange filing. That compares with the Rs 331.4-crore consensus estimate of analysts tracked by Bloomberg.

"The quarter witnessed continued demand pickup in rural markets outpacing growth in urban markets for the second quarter in a row," the company stated after posting the results.

Colgate-Palmolive also reported a high-single digit volume growth in their toothpaste line. Along with this, good all-round performance in toothpaste, toothbrush and personal care segments led 12.8% growth in domestic revenue on annual basis during the quarter under review, the company said.

• Revenue up 13.1% to Rs 1,497 crore. (Bloomberg estimate: Rs 1,429 crore).

• Ebitda up 21.6% to Rs 508 crore. (Bloomberg estimate: Rs 471 crore).

• Margin at 34% versus 31.6% (Bloomberg estimate: 33%).

• Net profit up 33% to Rs 364 crore. (Bloomberg estimate: Rs 331 crore).

Citi Research maintained its 'sell’ rating on the Colgate-Palomlive stock with a target price of Rs 2,850, implying a downside of 11.5% from the previous close. However, the brokerage noted that Colgate’s rural market growth continued to outpace urban markets.

Citi believes that the following factors drove the high single-digit volume growth and double-digit revenue growth in its toothpaste portfolio:

• For the second quarter in a row, Colgate India management highlighted the improving demand trends in rural markets.

• Increased product investments, such as higher ad and trade spends, brand building, and its 'Brush Twice A Day' campaign.

• Product innovation

Citi has also raised the fiscal 2025–2027 earnings estimates by 2-5% after incorporating June quarter earnings and tweaking growth assumptions.

Jefferies retained its 'buy' rating on the stock with a target price of Rs 3,163.80, implying a potential upside of 13% from the previous close.

Colgate reported earnings well ahead of Jefferies' and the consensus' estimates, the note said. "This drove us to upgrade earning estimates for the third quarter in a row. We like growth agenda and retain 'buy' despite high valuation," it said.

The company reported a 13% year-on-year revenue growth in the June quarter, its fastest in over five years. This was driven by strong volume and value growth in the toothpaste business which also surpassed Hindustan Unilever Ltd. oral care portfolio's mid-single-digit value growth, said the brokerage.

It upgraded the company's fiscal 2025-2027 earnings per share by 6%, marking the third straight quarter of upgrades.

Shares of Colgate-Palmolive rose as much as 6.35% to hit record high of Rs 3413.75 apiece on the NSE. It was trading 5.73% higher at Rs 3393.90 apiece, compared to a 0.08% advance in the benchmark NSE Nifty 50 as of 10:17 a.m.

The stock has risen 66.64% in the last 12 months and 34.06% on a year-to-date basis. The total traded volume so far in the day stood at 49 times its 30-day average. The relative strength index was at 84.59 indicating that the stock may be overbought.

Seven out of the 35 analysts tracking Colgate-Palmolive have a 'buy' rating on the stock, 13 recommend a 'hold' and 15 suggest a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential downside of 10.8%.