 "Colgate-Palmolive, Colgate")
The stock of the largest oral hygiene company in the country, Colgate Palmolive (India) fell about 4 per cent on Wednesday after the market leader posted a muted performance for the first quarter of the financial year 2026 (Q1FY26).
Sentiment for the stock, which has shed 15 per cent over the past three months, continues to remain bearish given the weak demand outlook. In addition to demand headwinds, brokerages expect the higher base to impact the sales and volume trends in the second quarter (Q2FY26) as well.
Given the high base of last year, the company reported its second straight quarter of a Y-o-Y fall in revenue growth. On a base of 13.1 per cent growth, the company reported a 4.2 per cent drop in revenues for the first quarter. While the company had taken price hikes of 3 per cent in the last quarter of FY25, and another hike in the first quarter of FY26, these gains were offset by higher promotions denting the pricing growth.
There was no support on the volume front.
Toothpaste volume declined by about 3-4 per cent due to the ongoing demand woes in the urban segment, higher competitive intensity and the elevated base. Estimated volume growth in the year ago quarter was at 7 per cent.
Brokerages believe that the operating performance was worse than expected.
“While the pressure on topline was on expected lines due to subdued urban demand and high competition intensity, compression on margins was higher than we had anticipated,” said Vishal Punmiya and Manas Rastogi of YES Securities.
Gross profit margins in the quarter slid by 170 basis points Y-o-Y to 68.9 per cent due to higher promotions as against expectations of over 70 per cent. While operating profit was down 11 per cent, operating margins declined 240 basis points Y-o-Y to 31.6 per cent due to lower operating leverage.
Staff costs saw an uptick of 70 basis points over the year ago quarter. YES Securities has cut its FY26/FY27 earnings by 3.6 per cent largely to bake in margin pressure as Colgate is prioritising investments, leveraging its healthy profit margins to remain competitive.
It believes that category recovery and update on diversification being explored in personal care will aid in building a constructive view on the stock. It has a neutral rating.
Nomura Research expects margin pressure to ease from the September quarter onwards supported by benign input cost and declining base effect. The brokerage has cut FY26/27 earnings by 7-8 per cent to factor in the weakness in demand.
“While we expect Colgate to see a recovery in sales and margins from H2FY26, we maintain our reduce rating as we forecast only a 7.7 per cent earnings growth over FY 26-28, which is at the low end of the range for our coverage universe,” Mihir P Shah and Riya Patni of the brokerage said.
The positive for the company is that the premium portfolio continues to gain traction and this is
where the company is focussing its advertising and promotions. However, there is a pressure on the mass end of the portfolio comprising Strong Teeth, Max Fresh and Active Salt which have witnessed price hikes. The company launches in the quarter included kids’ toothpaste in strawberry and watermelon flavors, and MaxFresh Mouthwash Sachet Stick in Fresh Tea Flavor.
Emkay Research expects further weakness in sales going ahead.
“As the competitive environment remains similar, with a double-digit growth base for Q2FY26, we may see revenue decline continuing,” says Nitin Gupta of the brokerage.
The brokerage estimates a muted topline growth of 5 per cent over FY25-28, constrained by limited category expansion and macro challenges. It believes that diversification beyond oral care remains a critical gap in the long-term growth narrative. Emkay has cut its earnings for FY26 by 2 per cent and maintained a sell rating.
