'Reduce' Rating On This Stock By HDFC Securities - Details

HDFC Securities Rating: The leading domestic brokerage firm HDFC Securities has maintained its ‘Reduce’ rating on the consumer product major Consumer Palmolive India in the near term due to range-bound margin growth and lack of diversity in the product lineup of the company.

However, the brokerage note, released on November 28, shared that the firm remains constructive about Colgate Palmolive India’s long-term strategy.

“We recently met the senior leadership team of Colgate Palmolive and we continue to remain constructive about its long-term strategy of driving market development, premiumisation and driving per capita consumption. However, we continue to maintain REDUCE rating with a TP of Rs 3,300 (48x FY27 EPS) as in the near term,” Vishal Gutka wrote in the brokerage note.

Share Price Target of Colgate Palmolive

With the ‘Reduce’ rating, HDFC Securities maintains the target price of Rs 3,300 for the stock which marks a Rs 281 upside on the current market price of the share.

On Wednesday, the share of the company ended 1.98 per cent or Rs 58.40 higher to settle at Rs 3,011.00 apiece. In the last six months, the shares of the company have jumped over 11 per cent.

Why HDFC Securities Give Reduce Rating to Colgate Palolive?

HDFC Securities gave a ‘Reduce’ rating to Colgate Palmolive for the following reasons:  

Moderate Growth Outlook: The company plans to focus on balanced growth through a mix of volume, price, and product mix, which is below consensus expectations of mid to high single-digit volume growth.  

Range-Bound Margins: Management indicated EBITDA margins would remain in the 31-33 per cent range, falling short of the market's expectation of margins exceeding 33 per cent.  

Premiumisation Challenge: While the strategy to drive premiumisation is promising, further improvement in margins from the current high base is necessary for re-rating.  

Lack of Diversification: Success in diversifying beyond oral care into new categories like dishwashing or personal care will be critical but remains uncertain.  

Valuation Concerns: At 48x FY27 EPS, the valuation appears stretched, with limited potential for further multiple re-rating unless the company demonstrates consistent core portfolio growth and improved profitability.  

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