Colgate Palmolive Q4FY23 Results: Should You Hold, Sell or Buy? this is what brokers say
Colgate Palmolive India share price reached a new high in 52 weeks of €1,713.00 each on BSE on Monday after oral care manufacturers Q4FY23 figures reported on Friday. Colgate Palmolive stock price closed €1,674.35, an increase of €48.05 or 2.95% on Monday.
The equity reaction was driven by the company’s better-than-expected performance in the March quarter, which beat market expectations. Due to a one-time tax refund, the company announced on May 12 a 2.27% year-over-year (YoY) net profit decline for the quarter ended March. €316.22 crores.
For the quarter, net profit rose 8.5%, the company said in a billing statement, excluding the effects of a one-time tax refund. It posted net sales of €1,341.7 crore in the fourth quarter of FY23, an increase of 3.7% over the same period the year before. Operating expenses for the company were lower at 942 crores against 974 crores. The company’s domestic revenue increased 5.4%.
Colgate Palmolive General Manager and CEO Prabha Narasimhan commented on the success of the quarter saying, “We are pleased with the sequential progress and results of the quarter. The company posted domestic growth of 5.4%, with toothpaste posting high-single-digit growth despite continued weak demand trends in the category, particularly in rural areas.”
Let’s take a look at the brokerage comments and reviews.
Kotak Institutional Stocks
The company reported a 1% year-over-year decline in toothpaste volumes, in line with the category’s decline (2-3%), according to the brokerage report. According to management, the rural recession has slowed growth in the category, but trends are improving. The share of the nature sector also seems to have reached a plateau. As the company delayed advertising and promotional spending in anticipation of the relaunch of “Strong Teeth” in the first quarter, gross margin increased 100 bps quarter-over-quarter (QoQ) and EBITDA margin increased 545 bps QoQ.
“The new CEO sees accelerating volume growth, led by market development, evidence-based premiumization and building/scaling a personal care portfolio. We closely monitor the initiatives and implementation. We increase FY2024-25E earnings per share by 1-2%, roll over and revise fair value to Rs 1,725 (Rs 1,630 previously) with ‘Add’ rating,” the brokerage said.
ICICI Direct Investigation
According to the brokerage’s report, the expansion of the oral care industry has slowed, with penetration levels approaching 100% in both urban and rural areas. The company has lost market share over the past eight years due to the growth of natural and Ayurvedic brands. In the past eight years, the toothpaste market has increased by 30% in natural products. The company aims to increase consumption and restore market share by encouraging daily brushing in rural India and twice-daily brushing in metropolitan areas.
To increase sales of personal care products, it would also expand the Palmolive brand into the body wash area. Because it has the largest gross margin of the FMCG companies, the company is able to increase advertising and promotion spending to drive growth.
“We believe that successful execution of category growth, personal care expansion and premiumization strategies would drive long-term growth for the company. We remain cautious about medium-term growth prospects. We maintain our ‘Hold’ rating on the stock with a revised price target of | 1560/share (| 1440/before),” the brokerage said.
Nuvama institutional shares
The company’s revenue in Q4FY23 (+4% year-over-year), EBITDA (+5% year-over-year) and PAT (2% year-over-year) were ahead of consensus, according to the brokerage report. While it was up 100 basis points quarter over quarter, gross margin remained unchanged year over year. Helped by lower advertising spend, the company posted its highest quarter-over-quarter EBITDA margin since Q4FY15 of 33.5%. Despite the weak economy, toothpaste grew by high single digits, contributing to the 5.4% year-on-year increase in domestic business.
“We expect Colgate’s innovation funnel and brand investment to continue to flow. Toothpaste (muted since the last few quarters), is starting to see quite a recovery. However, we await market share gains with a greater focus on the natural products and non-oral care segment. Maintain ‘Hold/SU’ with a revised target price of €1,710,” said the brokerage.
Colgate Q4 Earnings: Net Profit Down 2.28% YoY in Q4, Board of Directors Announces Second Interim Dividend of €21
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