First Read: Colgate-Palmolive India "Revenue growth surprises positively" (Buy)

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First Read: Colgate-Palmolive India "Revenue growth surprises positively" (Buy)

expects A&P spends to go up in FY27 vs FY26; 6) Digital channels (c10% of sales) 03/26E 49.66 49.38 -1 49.65

outpaced overall growth while being margin and mix accretive; 7) GST inverted duty 03/27E 55.12 54.94 -0 52.66

structure impacted margins by c160bps in Q4 and c80bps in FY26, and is likely to weigh 03/28E 60.10 60.62 1 57.70

on FY27 margins, despite efforts to seek refunds; 8) In our view, nonetheless, FY27

earnings outlook appears much superior to FY26. Amit Sachdeva

Analyst

amit.s@ubs.com

Risk-reward favourable, with revenue and earnings visibility becoming clearer +91-22-6155 6029

1) Colgate's stronger earnings cycle are associated with periods where meaningful

Sidhant Jain

pricing growth is part of the growth equation, which tends to be strong catalyst for

Associate Analyst

stock performance; 2) Pricing growth has resumed after several quarters of pause, and is sidhant.jain@ubs.com

likely to sustain over next few quarters, supported by improving revenue mix; 3) In our +91-22-6155 6000

view, Colgate wanted to reset its EBITDA margin lower (which peaked in FY24), which

Tushar Baijal

now opens better prospects for earnings growth; 4) The stock has corrected significantly Associate Analyst

(c43% from its Sept'24 peak), and now trades at c40.2x one-year forward multiple tushar.baijal@ubs.com

(broadly in-line with 5yr average), which in our view appears tenable. Hence earnings +91-22-3051 5000

growth revival in coming quarters could spur the earnings compounding cycle for

Colgate; 5) Further, in an inflationary period, Colgate appears to be a more resilient play,

which increases its defensive appeal. Hence we see a favourable risk-reward of owning

Colgate in the current cycle.