Colgate dominates Indian households as a leading FMCG company in the oral and personal care segment, but does its stock belong in your portfolio?
Colgate India recently announced Q3 FY2024 results that beat analyst estimates – net profit rose 35.71% year-over-year to INR 3.30 billion. However, its stock fell nearly 2% post the announcement amidst mixed ratings.
Looking beyond the numbers, should you invest in Colgate shares right now? This article explores a comprehensive analysis of Q3 highlights, financial health, competitive forces, and investor sentiment. Let’s get started!
Also read: Fast-Moving Consumer Goods (FMCG) Sector- A Safe Haven in Bear Markets?
Colgate results for Q3 FY24 update
Colgate Palmolive quarterly results have been released, and earnings for the company this quarter have increased and exceeded analyst expectations. On January 22, 2024, Colgate Palmolive India released its Q3 FY24 results. Both the earnings and the top line grew by 35.71% and 8.08%, respectively, year over year.
There was a 5.13% fall in sales and a 2.92% decrease in profit from the previous quarter.
The net profit for the quarter ending December 31 increased from 2.43 billion rupees to 3.30 billion rupees.
Despite the rising pricing of essentials, sales of consumer goods have been strengthened by urban customers with a higher average income.
Selling, general, and administrative costs climbed 16.83% year over year and by 0.61% quarterly. Operating income grew by 34.38% year over year and decreased by 2.47% quarterly. Over the last week, Colgate Palmolive India has delivered a return of 1.98%; over the past six months, 38.37%; and year-to-date (YTD), 0.26% (as of January 25, 2024).
However, following the release of the FMCG giant’s third quarter results, analysts’ reactions to the news caused Colgate-Palmolive India shares to fall by as much as 2% on January 23.
Out of the 30 analysts who cover the business as of January 24, five have assigned a strong sell rating, five have assigned a sell rating, ten have assigned a hold rating, seven have assigned a buy recommendation, and three have assigned a strong buy rating.
Also read: Fundamental Analysis of Wipro Ltd.
Colgate Palmolive India’s competitors
Some of the competitors of Colgate Palmolive India ranked by market capitalisation (₹ cr.) as of January 25, 2024, are:
- Hindustan Unilever Ltd. (574,533.80)
- Godrej Consumer Products Ltd. (117,138.50)
- Dabur India Ltd. (94,095.16)
- Marico Ltd. (68,108.36)
Evolution of Colgate Palmolive
With more than 80 years of experience, Colgate-Palmolive India Ltd. is one of India’s top dental care and personal care companies.
Initially employing hand carts to deliver Colgate Dental Cream, the business gradually extended the range of products it offered under the Colgate and Palmolive brands, eventually adding toothbrushes, mouth rinses, shampoos, soaps, and more.
The business has set up a vast distribution network throughout the nation, including storage facilities in Kolkata, Chennai, and Mumbai. With its popular Bright Smiles, Bright Futures programme, the organisation has been a leader in raising awareness of and providing education about dental health.
The business has maintained its position as India’s most reliable oral care brand in 2019.
Total sales for Colgate Palmolive India were 52.8 billion Indian rupees in 2023. This was more than the previous year, which had a total income of almost 51 billion Indian rupees.
Investing in Colgate Palmolive India
Following the Colgate results for Q3, Goldman Sachs, Citi, and CLSA have given Colgate-Palmolive a “sell” rating. However, the stock has a “buy” call from both HSBC and Jefferies.
So, if you are wondering whether to invest in the company after the Colgate Q3 results, check out the pros and cons.
Pros
- Strong financials
The company’s sales grew by 8.21% to ₹1,386.41 crore in Q3, driven by strong volume growth and market share gains in the oral care and personal care segments. This can boost the company’s earnings and cash flows and increase its value for investors.
Higher revenue growth can also reflect the company’s ability to adapt to changing consumer needs and attract more investors.
- Robust network
Colgate can efficiently transport the product and cater to a large consumer base because of their strong distribution network and competent supply chain in both the urban and rural sectors. More than 17 lakh shops directly showcase the company’s goods.
- Solid customers base
Colgate, a company spanning two centuries and operating in more than 200 countries, has established a robust financial position. Because of this, they have established a significant market presence and position via the company’s expanded product portfolio.
Colgate can now scale up or down in response to market demands and enjoy more pricing stability due to process automation. They have a proven track record of developing new products.
Cons
- Fierce competition
The business is up against fierce competition from other companies operating in the oral care and personal care markets, including Hindustan Unilever, Dabur, Patanjali, Procter & Gamble, and others.
- High P/E ratio
The company’s valuation is relatively high, as it trades at a price-to-earnings ratio of 53.71. A higher P/E ratio means that the market is paying more for each unit of earnings and expects higher future growth. However, depending on your risk appetite, this can be a pro or con.
- Uncertainty regarding the stock price
The company’s stock price can be volatile, as it is influenced by market sentiments, macroeconomic factors, and quarterly results.
Also read:HDFC Bank Q3 results: A quarter of growth for HDFC in 2023/
Financials
| Metric | Value |
| Market cap (₹ Cr.) | 66,994.14 |
| Book value per share (₹) | 63.27 |
| Dividend Yield | 1.58% |
| ROCE | 79.28% (as of March 2023) |
| ROE | 61% |
| Face value (₹) | 1 |
Shareholding pattern of Colgate Palmolive
The shareholding pattern (as of December 2023) of Colgate Palmolive India is as follows:
Promoters: 51%
Foreign Institutional Investors (FIIs): 24.62%
Domestic Institutional Investors (DIIs): 5.88%
Public: 18.5%
Conclusion
Colgate-Palmolive India is a progressive business that is rethinking what it means to have a healthy future for everyone.
However, from an investing perspective, while Colgate India delivered robust Q3 growth, conflicting analyst opinions on its stock price warrant a closer look into key metrics and market dynamics before making an investment decision.
