Colgate Palmolive India - Surprise potential and low expectations (also valuation) make the odds in favour; ADD - ICICI Securities

We recognise that turning structurally positive on Colgate requires multiple factors to improve. With a not-so-favourable narrative of (1) high category penetration, (2) marginal presence in naturals and (3) no visible improvement in consumer habit of twice brushing, the stock performance has mostly been modest (underperformance vs Nifty in all time frames - 1, 2, 3, 5, 10 year).

That said, we reckon Colgate (stock) fundamentals (and narrative) may potentially improve over 12-24 months. Firstly, any likely deceleration in growth of naturals segment within toothpaste removes an important growth headwind for Colgate. Two, the simple template of new CEO driving stock performance is yet to play out. Three, the work on new categories may finally be unveiled (Ram Raghavan indicated there is 6-9 months' delay due to Covid). Lastly, Colgate is finally thinking like a category leader and looking to expand the market.

Two plausible outcomes of the above - (1) some indications of improving fundamentals leading to stock performance and (2) the stock providing roll-over returns. We like the probability of the first outcome amidst low expectations.

Consensus (including us) has three expectations from CLGT - (1) diversify in other home and personal care categories, (2) play the role of a category leader and drive (a) category usage (per capita consumption) and (b) category expansion through new sub-segments and (3) drive growth in natural segment. ADD.

Shares of Colgate Palmolive (India) Limited was last trading in BSE at Rs. 1642.55 as compared to the previous close of Rs. 1654.35. The total number of shares traded during the day was 7298 in over 802 trades.

The stock hit an intraday high of Rs. 1675.00 and intraday low of 1633.00. The net turnover during the day was Rs. 12017970.00.

Source : Equity Bulls

Keywords

ColgatePalmoliveIndia INE259A01022 ResultUpdate ICICISecurities