Colgate shares pop 6% after reporting Rs 364 crore Q1 profit. Should you invest?

Shares of Colgate Palmolive (India) surged nearly 6% to a new all-time high of Rs 3,397.95 on the BSE after the company reported a 33% year-on-year (YoY) increase in net profit, reaching Rs 364 crore. The rise was driven by price hikes and steady domestic demand.

Despite Colgate Palmolive raising prices to offset higher raw material costs, customers continued to prioritize spending on personal care products.

The demand in rural markets outpaced growth in urban areas for a second straight quarter, the company said.

Here is how brokerages have viewed the Q1 update:

Investec: Hold | Target price: Rs 3,108
Investec has maintained a hold rating on Colgate and hiked the target price to Rs 3,108 from Rs 2,640.According to the global brokerage, Q1 was a blowout quarter. Volume-led 13% revenue growth is a decadal high and it believes that internal initiatives on product superiority, focus on its strengths as well as a favourable rural macro are both key drivers of growth. The company’s life-high valuations of 51x FY26E earnings kept the brokerage firm on the sidelines.Jefferies: Buy | Target price: Rs 3,570
Global brokerage Jefferies has maintained a buy view on the stock and has hiked the target price to Rs 3,570 from Rs 3,020.The company showed impressive growth in revenues with HSD volume growth in Q1 as a confluence of macro factors like pick up in rural along with strong execution helped Colgate. Jefferies has upgraded earning estimates for the third quarter in a row as it likes the growth agenda of the company and retained a BUY despite a high valuation.

Goldman Sachs: Sell | Target price: Rs 2,750
Goldman Sachs has maintained a sell call on Colgate while hiking the target price to Rs 2,750 from Rs 2,150.

The toothpaste volume grew at high single digits, while the toothbrush also saw a turnaround. The company’s EBITDA margin expansion driven by higher gross margins and the current competitive environment in oral care allows the company for price-driven margin increases. Goldman Sachs has raised the target price but retained sell on stretched valuations.

Bank of America: Underperform | Target price: Rs 3,175
BofA has an underperform rating on the stock while raising the target price to Rs 3,175 from an earlier Rs 2,660.

Colgate India has had a good start to FY25E. The sustainability of the growth trends should be key to maintaining stock price momentum going forward, especially in the context of the recent outperformance. BofA thinks that the valuations factor in medium-term upside potential.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)