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Positive surprise on volume, lags near term triggers

CLGT’s 1Q27 revenue grew 11.8% YoY to ?16bn (PLe: ?15.5bn), driven by healthy highsingle-digit volume growth (~8.5%), profits were higher as full impact of input cost increase was not reflected in 1Q27. We raise our FY27/FY28 EPS estimates by 1.3%/1.4%, driven by 1) sustained traction in the premium portfolio, 2) calibrated price hikes to offset RM volatility and 3) cost-saving initiatives to support EBITDA margins despite elevated A&P spends. However, we believe some growth challenges to emerge on expected EL Nino impact on rural demand and full impact of input cost inflation from 2Q27.

We factor in ~5.5% volume growth over FY26-FY28 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) continued focus on innovation across price points. We estimate 9% EPS CAGR over FY26–28. We value CLGT at 38x March’28 EPS, with a target price of ?2,242 (?2214 earlier). Retain HOLD

Sales grew 11.8%, EBITDA Margins contract 144bps YoY

* Revenues grew by 11.8% YoY to Rs16bn. Gross margins expanded by 104bps YoY to 70% (Ple: 68.7%). EBITDA grew by 6.7% YoY to Rs4.8bn (PLe:Rs4.6bn); Margins contracted by 144bps YoY to 30.1% (PLe:29.7%). A&P spends expanded by 257bps YoY to 15.7%. Adj. PAT grew by 8% YoY to Rs3.5bn (PLe:Rs3.25bn)

* Volume growth came in at high single digit of ~8.5%. Premium portfolio continues to grow at a faster pace than mass portfolio.

* Urban demand remains strong and is growing faster than rural demand.

* CLGT has taken low single digit price hike in May, which will enable offset the impact of higher input costs partially in 2Q27.

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SEBI Registration number is INH000000933