Motilal Oswal upgraded Colgate-Palmolive shares to ‘Buy’ with a target price of Rs 1,090 (Rs 942 earlier). The brokerage house believes that there is a strong growth potential in the category and management is also confident on growth prospects of the company.
Colagate has a track record in tackling competition in oral care, both in India and other emerging markets. However, recovery in sector demand is still some time away, and competitive intensity is likely to remain high in the ongoing financial year 2017. According Motilal Oswal, likely good monsoon and government schemes are expected to provide a fillip to demand. Colgate, with over a third of its sales coming from rural India, is likely to be a major beneficiary.
In the past one year, share of Colgate-Palmolive plunged over 9 per cent to Rs 925.10 on July 4. Motilal Oswal in a research note said, “Shares of Colgate appears reasonable post the decline from its peak levels. P/B is close to decadal lows, and P/E is lower than both five-year average and MNC peer multiples.”
For the quarter ended March 31, 2016, Colgate reported net profit of Rs 145.89 crore, down 10.84 per cent, against Rs 163.63 crore in the corresponding quarter a year ago.
Number of Indians brushing twice a day even in urban areas is less than 20 per cent. As awareness of hygiene levels increases, per capita consumption could rise significantly.
On July 6, shares of Colgate was trading at Rs 925.10.