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Should investors buy, sell or hold after the third quarter results?

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Should investors buy, sell or hold after the third quarter results?

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Shares of Colgate Palmolive India rose 1% on Friday after the company reported a 1.6% increase in net profit in the third quarter. According to an exchange filing, the company’s net profit after tax was Rs 252 crore compared to a net profit of Rs 248 crore for the same quarter last year.

Colgate’s net sales rose more than 4% for the quarter under review to Rs 1,271 crore. Its net sales for the nine months ended December 31 were Rs 3,773 crore, up more than 7% from the same period last year.

“Despite the macroeconomic challenges, our growth remains strong, consistent and provides the right balance between volume and revenue growth. Strengthening brand penetration reflects continued consumer confidence in our brands,” said Ram Raghavan , managing director of Colgate-Palmolive India.

As the certificate is currently trading up 0.7% at Rs 1,405, what should investors do with it? Here is what the brokers are saying:

CLSA on Colgate

Call: Outperform | Target price: Rs 1,540

Although its results were slightly below CLSA’s expectations, the brokerage firm expects Colgate to offer better returns than the average market given 3% volume growth and price growth. from 1 %. The brokerage, however, added that the company faces multiple headwinds and earnings visibility remains low. He said the 2-3% price hike in November 2021 was absorbed due to an increase in promotions this year compared to the previous year.

Nomura on Colgate

Call: Neutral | Target price: Rs 1,700

Nomura is “neutral” on Colgate given its anemic growth and that pressure may continue due to weak rural demand. Its gross margin slipped to 66.6% due to high input costs and lower effective prices. But the company is maintaining a high pace of innovation with new product and subcategory launches, he said.

In the oral care segment, Colgate launched Gum Expert, an advanced toothpaste. It fell into the facial cleansing category, with products such as facial foams, masks and scrubs. It also launched Colgate RecyClean, one of its kind toothbrushes with plant-derived, BPA-free bristles and made from 100% recycled plastic, the company said in a press release.

The company expects to continue a strong innovation pipeline, “with new initiatives launching this quarter,” Colgate added.

Nomura said the company is entering a period of low growth with no lasting triggers. And while the company’s valuations are cheap, lackluster earnings growth may limit the stock’s upside, the brokerage added.

Jefferies on Colgate

Call: Buy | Target Price: Rs Rs 1,700

Jefferies said the company’s revenue growth was in line with its estimates. However, despite product price increases, its realization growth is weak even though volume growth is 3%. The brokerage said the company’s gross margin has begun to stabilize despite heavy pressure. “A resumption of growth is essential for share price performance,” he added.

ICICI Securities on Colgate

Call: Add | Target price: Rs 1,550

ICICI Securities cut its FY23 earnings estimate by 2%. It maintained an “added” rating but cut the target price from Rs 1,600 to Rs 1,550, saying “the main downside risk is market share gains below expectations”.

The brokerage said the 3.9% year-over-year revenue growth is “disappointing,” but not “unexpected.” Moreover, its pressure on the gross margin and its weak growth led to an EBITDA margin below 30%, despite a significant reduction in advertising expenses.

Yes Securities on Colgate

Call: Add | Target Price: Rs 1,584

Yes Securities downgraded the stock from “buy” to “add” as weaker growth and inflation concerns over margins are expected to delay the trajectory of earnings growth.

He said, with management indicating its efforts to maintain a balance between volume growth and price growth, “we expect volumes to gradually improve, albeit at a slower pace than expected.”

Should investors buy, sell or hold after the third quarter results?

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