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Colgate-Palmolive recently highlighted its increasing success in the naturals segment, led by Vedshakti, but market analysts are divided and cautious as they wait for stronger clues. The stock on Monday tumbled 3.7 per cent to ₹1,540.40 on the BSE.
According to analysts, though the company has gained market share, they will wait till a clearer picture emerges on its sustainability.
The company management has announced a strategic framework, led by building platforms, technological superiority and new opportunities, which it believes, will help enable the company to dial up its growth momentum.
The naturals category offers a broader perspective and better opportunity to meet customer needs. It further enables customers to upgrade. Therefore, the company is expanding the Vedshakti portfolio with mouth sprays and pulling oil, along with toothpaste, said Motilal Oswal Financial.
“Colgate lost market share during FY15–17 and has since arrested the share loss. It has also gained some share recently and hopes to sustain this going forward. The next phase of growth would be led by premiumisation and behavioural changes, category adjacencies, and (hopefully) share gains as well,” added Motial Oswal, which retained ‘Buy’ rating with a target price of ₹1,860.
With a steady core portfolio, the innovation pace has improved, said Emkay Global, with a ‘Buy’ rating and target price of ₹1,700. Colgate has extended its naturals equity to differentiated formats like mouth spray, oil pulling; launched a diabetic toothpaste targeting niche segment; and introduced superior global technologies (Visible White Instant). The higher intent to expand the portfolio into new categories is positive, it added. However, Centrum Broking has maintained ‘Sel’l advice on the stock even though it remains optimistic on the company’s strategy counting on innovation, invest behind brands and direct distribution. “We remain cautious until we see lower competitive intensity and sustainably in gaining market share in the naturals portfolio.”
JM Financial recommends ‘Hold’ on Colgate with a target price of ₹1,560. “Colgate’s platform approach to address oral care needs and enhance consumer engagement is interesting in our view, for example, extending the Charcoal and Salt franchise to toothbrushes, launch of adjacent products under the Vedshakti umbrella," it said, adding that "premiumisation remains an over-arching theme....”
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