After Colgate's Q2 results, the share price has fallen by over 3%. The company's performance has been weak for 3-4 quarters, and GST cuts have impacted distribution. Gradual recovery is expected in the second half. Brokerages have given mixed ratings on the stock, with targets set between ₹2,130 and ₹2,870.
Colgate share price: Shares of FMCG giant Colgate (Colgate Palmolive) have fallen by over 3% after its Q2 results. The company's revenue decreased by 6% year-on-year, and EBITDA also fell by 6%. Performance has been weak for the past 3-4 quarters, with distribution affected due to GST cuts. Brokerage houses such as Nuvama, Jefferies, Nomura, and CLSA have given mixed ratings on the company, anticipating a recovery in FY27 despite the weak Q2 figures.
Weakness in Q2 Performance
In the company's second quarter (Q2 FY26), revenue saw a 6% year-on-year decline. EBITDA also fell by 6%, and there was no significant increase in margins. Volumes recorded an 8.5% year-on-year decline. Experts state that the GST rate cut and its impact on the distribution network were the main reasons.
Colgate's management has also acknowledged that issues at the distributor and retailer levels have impacted the business. However, the company stated that it has focused on growth even in a challenging environment. Gradual recovery is expected in the second half of fiscal year 2026.
Valuation and Stock Value
Colgate's stock is currently trading at 40x P/E for FY27. Investors have also considered this high valuation. Jefferies has cut its EPS estimates by 4-5%, which has increased pressure on the stock in the market.
Experts suggest that the stock's valuation appears expensive, and in light of recent results, investors need to remain cautious.
Colgate Faces Challenge from Other Brands
In the second quarter, various trends were observed among Colgate's competitors. Dabur's oral care segment continued b growth, with double-digit growth anticipated in the future. Meanwhile, HUL's oral care segment experienced a slight decline. Closeup showed single-digit growth this quarter.
Analysts state that changes in competition could affect Colgate's performance. This time, better sales from other brands have put additional pressure on the company's shares.
Brokerage Views
Nomura has given a 'Reduce' call on Colgate with a target price of ₹2,200 per share. The brokerage noted an 8.5% decline in Q2 volumes and a 6.3% decrease in sales. Margins remained stable. Modest recovery is expected in the second half.
Jefferies has given a 'Buy' call on Colgate with a target price of ₹2,700 per share. The brokerage stated that Q2 saw a decline in revenue and EBITDA. De-stocking occurred due to the GST rate cut. EPS estimates have been reduced by 4-5 percent.
CLSA has given a 'Hold' call with a target price of ₹2,130 per share. The brokerage noted that the company's results were weaker than expected across all parameters. Q2 saw a 6.3% year-on-year decline in sales. The impact of margin improvement will be limited by weak sales.
Nuvama has given a 'Buy' call on Colgate, reducing its target to ₹2,870. The brokerage noted that Q2 results were relatively weak, but the 4% decline in toothpaste volumes was within estimates.
Pressure on Colgate Shares, Recovery Expected in FY27
Experts state that pressure on Colgate's shares will likely continue for now. While signs of market and sales improvement may appear in the second half, there is no certainty yet. Investors will need to monitor the company's upcoming performance and competitive market conditions.
Due to declining volumes and high P/E valuation, pressure on Colgate's stock will certainly persist. According to experts, the market will be watching the company's recovery in FY27.
