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Volumes turn positive, structural headwinds sustain

CLGT’s 4Q26 revenues grew 9.1% YoY to Rs.15.9bn (PLe: Rs.15.4bn), as volumes were in the range of 4-5% led by uptick in urban demand and grammage increase in LUP. Rural market continues to outperform urban markets; however, the gap has narrowed considerably. Premium segments continue to do well, growing 35% over last 2 years.

CLGT is facing input cost pressures in key inputs, it is taking price increase (Ist since GST reduction) to ward off inflationary impact. CLGT is aiming up to mid-single volume growth, GM might expand but higher ad-spends will prevent any EBIDTA margin expansion. We factor in mid-single digit volume growth led by

(1) strengthening core toothpaste franchise

(2) premiumization (contribution in sales mix up 35% in 2 years) through science-backed innovations within oral care 

(3) sustained market share despite increasing competition from smaller D2C brands. We estimate 8.3% EPS CAGR over FY26–28. We value CLGT at 38x March’28 EPS, with a target price of Rs.2,214         (Rs.2174 earlier). The stock lacks triggers, although downside seems limited. Retain HOLD.

Sales grew 9.1%, EBITDA Margins contract by 211bps YoY:

* Revenues grew by 9.1% YoY to Rs16bn (PLe: Rs15.4bn)

* Volumes grew by ~4-5% led by 3x growth in premium segment with brands like Total. Max Fresh, Visible white and Active salt.

* Gross margins contracted by 76bps YoY to 69.9% (Ple: 69.9%). EBITDA grew by 2.3% YoY to Rs5.1bn (PLe:Rs5.17bn); Margins contracted by 211bps YoY to 31.9% (PLe:33.6%). A&P spends increased by 13bps YoY to 12.5%

* Adj. PAT grew by 3% YoY to Rs3.7bn (PLe:Rs3.60bn). The company declared second interim dividend of Rs. 24/ share.

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