Thus, some analysts have refrained from giving a ‘buy’ call on the stock, despite the Q1 performance. For instance, analysts at Edelweiss Research have maintained a ‘hold’ rating on the stock and would relook their rating on market share gains.
Further, according to a report by PhillipCapital, increased competitive intensity and slowing category growth are key challenges to tackle a meaningful recovery.
Recent integration of GSK Consumer with HUL would make the premiumisation journey much tougher for Colgate.
The broking house has a ‘sell’ rating on the stock.
Colgate’s efforts to recover lost market can be seen in its focus on volume growth, led by new launches, higher advertising spend, and expansion in the natural segment (Swarna Vedshakti). The Street will watch out for the impact of these steps amid higher competitive intensity, which could have a negative impact on operating profit margins.
The metric at 29.6 per cent in Q1 was up 196 bps year-on-year and was the highest in at least a decade, mainly led by a sharp cut in advertising spends. Its overall domestic volumes declined 7-8 per cent, according to analysts (the company did not disclose the volume data), leading to about 4 per cent fall in revenue to Rs 1,033.6 crore.