Colgate-Palmolive (India), a market leader in oral care in the country, witnessed a 5.3% surge in its share price, marking a new 52-week high of ₹1,714.45 apiece during Monday's intraday trade.
This was in response to the company's better-than-expected performance in the March quarter, which surpassed market estimates. The company on May 12 reported a 2.27% YoY decline in its net profit to ₹316.22 crore for the March-ending quarter due to the impact of a one-time tax reversal.
Excluding the impact of a one-time tax reversal, the net profit grew by 8.5% for the quarter, the company said in an exchange filing.
It reported net sales of Rs. 1,341.7 crore in Q4 FY23, a growth of 3.7% over the same quarter of the previous year. The company's operating expenses came in lower at ₹942 crore compared to ₹974 crore. The company's domestic sales increased by 5.4%.
Gross margin stood at flat YoY at 66.9% as raw material prices corrected during the quarter, while OPM marginally improved by 46 bps YoY to 33.5% in Q4FY23, aided by lower advertising expenses.
For the fiscal year ended on March 31, 2023, the company's net sales came in at Rs. 5,187.9 crore, showing an increase of 2.4% compared to the previous year.
However, the net profit for the year was reported at Rs. 1,047.1 crore, which is lower than the net profit of Rs. 1,078.3 crore for the previous year. But if the impact of a one-time tax reversal in the previous year is excluded, the net profit increased by 0.1% for the year.
Commenting on the Q4FY23 performance, Ms. Prabha Narasimhan, Managing Director & CEO of Colgate-Palmolive (India) Limited, said, “We are happy with the sequential progress and outcomes of the quarter. The company has delivered domestic growth of 5.4%, with toothpaste delivering high single-digit growth despite continuing sluggish demand trends in the category, especially in rural.”
"Management is focusing on improving the toothpaste category’s growth by creating awareness of oral hygiene (especially in rural markets) and then achieve higher volume growth ahead of the category’s growth by focusing on key growth drivers," said domestic brokerage firm Sharekhan.
The brokerage firm expects Colgate's operating profit margin (OPM) to improve moderately as the company plans to increase its media spends on relaunches and key brands.
Sharekhan anticipates that Colgate's revenue and profit after tax (PAT) will grow at a CAGR of 6.8% and 7%, respectively, over the period between FY2023 and FY2025. This growth rate is lower than that of other FMCG companies.
It maintained a 'reduce' rating on the stock and has revised its price target to Rs. 1,515. The brokerage notes that any improvement in the company's market share and volume growth could act as a key re-rating trigger for the stock.
On the other hand, Motilal Oswal has maintained a 'neutral' rating on the stock and set a target price of Rs. 1,575 per share. Kotak Institutional Equities has given an 'add' rating to the stock and a target price of Rs. 1,725 apiece.
30 analysts polled by MintGenie on average have a 'hold' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.