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Demand Remains Subdued; Maintain HOLD

Est. Vs. Actual for Q3FY25: Revenue – MISS; EBITDA – MISS ; PAT– MISS

Changes in Estimates post Q3FY25

FY26E/FY27E: Revenue: -1%/-1%; EBITDA: -3%/-3%; PAT: -3%/-3%

Recommendation Rationale

• Muted demand environment: The company reported Q3FY25 revenue of Rs 1,452 Cr, up by ~5% YoY (mid-single-digit volume growth), a sharp decline from double-digit growth in H1FY25 impacted by a subdued demand environment, particularly in the urban market. However, the management emphasised that the positive momentum in their premium portfolio continues, led by science-backed innovations.

• New launches: CLGT launched the MaxFresh range with heart-shaped cooling crystals and 10x longer-lasting cooling effects. The product was launched exclusively on ecommerce and quick-commerce platforms.

• Growth Drivers: 1) Growth acceleration in the core portfolio through increased marketing spends,2) Premiumisation through science-based innovations, 3) Driving category growth in Toothbrush and building personal care portfolio under Palmolive, and 4) Increasing usage frequency along with driving rural penetration.

Sector Outlook: Cautious

Company Outlook & Guidance: Management expects the near-term outlook to remain under pressure while continuing to focus on its core growth drivers. We have cut our FY26/FY27 estimates by 3% each to account for the weak near-term demand environment.

Current Valuation: 43x Dec’26 EPS (Earlier Valuation: 46x Dec’26 EPS )

Current TP: Rs 2,850/share (Earlier TP: Rs 3,150/share )

Recommendation With an upside 6% from the CMP, we maintain our HOLD rating on the stock

Financial Performance: The company reported revenue growth of ~5% YoY (mid-singledigit volume growth), a decline from the double-digit growth seen in H1FY25, impacted by a subdued demand environment. Gross margin declined by 228 bps YoY to 69.7%, while EBITDA decreased by 3% YoY, with EBITDA margins down 250 bps to 31.3% due to higher input costs and a 15% YoY increase in other expenses. The company’s Adjusted PAT stood at Rs 323 Cr, a decline of 2% 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, and 4) Expanding the personal care portfolio to mitigate risks associated with the slow-growing oral care category

However, we believe this strategy will have a long gestation period and will require consistent investment in market development (higher marketing and ad spends). Moreover, the weak demand environment will further put pressure on the company’s bottom line in the near term. Hence, we remain cautious about Colgate from a near-term perspective and maintain our HOLD stance on the stock.

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