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Growth Holds; Higher Ad Spends Drag Margins Est. vs. Actual for Q2FY27: Revenue – BEAT; EBITDA – MISS; PAT – MISS Changes in Estimates post Q2FY27 FY27E/FY28E: Revenue: -1%/-1%; EBITDA: -10%/-14%; PAT: -10%-15%

Recommendation Rationale

* Top-line Remains Resilient: Colgate-Palmolive reported 12.2% YoY revenue growth to Rs 1,692 Cr in Q2FY27, marking the second consecutive quarter of double-digit growth. Performance was supported by high-single-digit volume growth in the toothpaste segment, led by the premium portfolio and strong traction in Colgate MaxFresh. The performance reflects sustained momentum in the core business and broad-based growth across brands and distribution channels.

* High-Cost Weigh Margins: In Q2FY27, gross margin expanded 44bps YoY to 69.6%, supported by cost efficiencies. However, EBITDA margin contracted 289bps to 28%, primarily offset by a 40% YoY increase in advertising spends to Rs 315 Cr, aimed at strengthening brand equity and premiumisation, along with a 15% rise in employee costs.

* Management Outlook: Management emphasized that despite geopolitical uncertainties and volatile commodity prices, it remains focused on safeguarding profitability through disciplined cost optimization and calibrated pricing strategies. The company expects to deliver strong growth driven by a science-backed product portfolio catering to diverse consumer needs, further reinforced by targeted advertising investments.

Sector Outlook: Cautiously Positive

Company Outlook & Guidance: We have maintained our BUY recommendation on the stock, considering the company’s intact growth outlook; however, we have cut our estimates.

Current Valuation: 40x Sep’28E EPS (42x Jun’28E EPS ).

Current TP: Rs 2,100/share (Earlier TP: Rs 2,570/share)

Recommendation: With an upside of 25% from the CMP, we maintain our BUY rating on the stock

Financial Performance: The company’s revenue increased by 12.2% YoY, led by its premium portfolio. Gross Profit increased by 12.9% YoY and gross margins expanded by 44 bps to 69.6%. Meanwhile, EBITDA increased by 1.7% YoY, while EBITDA margins contracted by 289 bps to 28%. PAT stood at Rs 342 Cr, up 4.3% YoY.

Outlook & Recommendation

We appreciate the company’s overall long-term strategy, which focuses on driving top-line growth through initiatives, such as

1) Launching science-based premium products to enhance overall realisations,

2) Developing the category by increasing awareness through marketing initiatives

3) Increasing the frequency of consumption and penetration in rural markets

4) Expanding the personal care portfolio to mitigate risks associated with the slow-growing oral care category. Hence, we maintain our BUY rating with a revised TP of Rs 2,100/share, implying an upside potential of 25% from the CMP

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SEBI Registration number is INZ000161633