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Beaten down valuations, but lag near term triggers

We cut our FY27/FY28 EPS estimates by 4.5%/2.1% due to 1) high input costs curtail margins at gross level 2) higher A&P spends, although they seem to have peaked out and 3) sustained competitive intensity, high inflation and poor monsoons impact on rural/urban bottom end demand. CLGT’s 2Q27 revenue grew 12.3% YoY to ?17bn (PLe: ?16.96bn), driven by healthy ~8% volume growth led by premium segment and max fresh gel, however, EBITDA and PAT missed estimates due to 364bps higher ad - spend.

While CLGT continues to grow ahead of market in premium segments, rising competition and inflation are impacting growth in Colgate strong teeth and Ved shakti. We factor in ~5.3% volume CAGR over FY26–29, driven by strong double-digit growth on premium segments like Colgate Total, Max Fresh, Visible white and renewed thrust on sensitive segment. We estimate 9.1% EPS CAGR over FY26–29. We cut TP to Rs1,837 from Rs2,114, valuing CLGT at 30x Sep’28 EPS vs. 35x Jun’28 EPS earlier, given derating of entire consumption segment. However, valuations at 26.6x FY29E earnings and 3% dividend yield limit downside. Retain Hold

Sales grew 12.3%, Gross Margins expanded 44bps YoY

Revenues grew by 12.3% YoY to Rs17.1bn (PLe: Rs16.96bn). Gross margins expanded by 44bps YoY to 69.9%. EBITDA grew by 1.7% YoY to Rs4.7bn; Margins contracted by 287bps YoY to 27.8%. A&P spends expanded by 364bps YoY to 18.5%. Adj. PAT grew by 4.3% YoY to Rs3.4bn. CLGT declared interim dividend of Rs24/share

* Volumes grew by high single digit (Ple: 8.0%) led by premium portfolio and strong performance in Colgate max fresh.

* During 2Q company launched Harry Potter-themed oral care and a Bluey-themed toothpaste with a vacuum-locked pump dispenser.

* 3Q might show the impact of inflation, deficient monsoons and price hikes on consumer demand.

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SEBI Registration number is INH000000933