Colgate-Palmolive growth plans fail to cheer analysts, shares fall 2% in early trade

According to Kantar World Panel, folks in urban households replace their brush every 6 months while those in rural areas do it in 15 months. Colgate aims to change this

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Share price of oral care products major Colgate-Palmolive (India) declined over 2 percent on December 14 as analysts remain wary of the company’s premiumisation plans announced on its annual investor day.

At 10am, the stock was quoting at Rs 1,607 apiece on the National Stock Exchange. For the year so far, it has given 10 percent returns, while the Nifty FMCG was up 22 percent in the same time period.

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According to Kantar World Panel, folks in urban households replace their toothbrush every six months while those in rural areas do it every 15 months.

CEO Prabha Narasimhan also said that in rural areas 55 percent of the population does not brush daily and in urban areas only about 20 percent of the households brush twice a day.

Colgate Palmolive believes it can change these numbers, driving up volumes.

Analysts at Citi believe driving change in consumer habit requires sustained investments and results are likely to be delayed. It has a Sell rating on the stock with target at Rs 1,650 per share.

“Focus on both volume growth and premiumization is likely a tall ask,” brokerage firm said.

Powered toothbrushes and teeth whitening products are some of its focus areas in premiumisation. The company is also planning to set up a business-to-business platform called DentistFirst.

Plus, it has announced foray into kids’ toothpaste category which includes products for the teething mouth and milk teeth stages.

“With loss of market share to herbal players, volume growth has been elusive for Colgate for several years now. Premiumization in general trade as well as traction in personal care (Palmolive) have been quite slow,” said analysts at Motilal Oswal Financial Services.

The company did not state any financial targets as part of the investor day.

MOFS has a Neutral rating on the stock with a target price of Rs 1,620 apiece. Foreign brokerage Nomura also has a Neutral rating with a target of Rs 1,600.

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