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Revenue momentum stable; miss in margin

* Colgate (CLGT) delivered 12% YoY revenue growth to INR17.1b (in line, 2-yr CAGR 2.5%) in 2QFY27. The company posted double-digit revenue growth for the second quarter in a row after six quarters of muted growth. Volume growth was in a high-single digit (est. 8%). Growth was broad-based across brands and distribution channels.

* Gross margin expanded 40bp YoY to 69.9% (est. 69.5%), with GP growing 13% YoY. The company remains committed to navigating commodity cost fluctuations through disciplined cost savings and calibrated pricing actions. However, on account of high investment in brand building and premiumization (ad spends up 40% YoY), EBITDA margin contracted by 290bp YoY to 27.8% (est. 30.3%).

* CLGT focuses on driving balanced growth through volume and calibrated pricing actions while sustaining investments in brand building and premiumization to support revenue growth. With Mr. Manish Anandani taking over as CEO, we will monitor the strategic priorities and execution initiatives under his leadership. We reiterate our BUY rating with a TP of INR2,000, based on 30x Sep’28E EPS.

In-line revenue; higher ad spending weighs on operating margins

* Double-digit revenue growth continues: CLGT registered revenue growth of 12% YoY to INR17.1b (est. INR17.2b), sustaining the double-digit growth momentum seen in 1QFY27, albeit on a soft base (-6%). The toothpaste portfolio delivered high-single-digit volume growth.

* Higher ad spends lead to EBITDA margin contraction: Gross margins expanded 40bp YoY to 69.9% (est. 69.5%), with gross profit up 13% YoY. Ad spends increased 40% YoY as CLGT continued to invest in brands. Other expenses and employee expenses grew 9% and 15%, respectively. EBITDA grew 2% YoY to INR4.7b (est. INR5.2b), with the miss driven by higher-thanexpected ad spends. EBITDA margin contracted 290bp YoY to 27.8% (est. 30.3%).

* Low-single-digit growth in profitability: PBT grew 4% YoY to INR4.6b (est. INR5.0b), while APAT increased 4% YoY to INR3.4b (est. INR3.8b).

* In 1HFY27, revenue/EBITDA/APAT grew 12%/4%/6%.

Valuation and view

* There are no material changes in our EPS estimates for FY27 and FY28.

* Management focuses on driving volume-led growth, supported by continued investments in brand building and premiumization, with calibrated pricing actions to navigate commodity cost fluctuations.

* CLGT appointed Mr. Manish Anandani as its new MD and CEO, effective 28th Sep’26. He has 30 years of experience and has joined from Kevenue, previously Johnson & Johnson, where he was MD of India markets.

* While high advertising spends may weigh on near-term margins, we expect growth momentum to remain intact, supported by healthy volumes and a premiumization-led portfolio mix. We model 7% revenue CAGR and 10% EBITDA CAGR over FY27-29E. We reiterate our BUY rating with a TP of INR2,000, based on 30x Sept’28E EPS.

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