Colgate Palmolive (India) Ltd’s shares plunged to a new 52-week low of ₹2,291 apiece on Wednesday after analysts slashed their earnings estimates following miserable June quarter results (Q1FY26) and dull near-term growth prospects.
So, what is the oral care company’s problem? It is simple. The base is high, especially after a strong show in the first half of FY25 when total operating revenue growth was 11.5% year-on-year. While this was expected to cap growth to an extent this year, the 4% drop in Q1FY26 revenue to ₹1,434 crore is worse than anticipated. In Q1FY25, revenue growth was 13%.
Colgate said it faced persistent headwinds last quarter owing to subdued urban demand and elevated competition intensity. Q1’s key disappointing factor was the volume decline. “Colgate’s toothpaste volumes declined by about 3-4% year-on-year (by our estimate), versus our expectation of flat growth,” said a Nomura Research report on 22 July.
As per Colgate, its premium portfolio delivered strong revenue growth in Q1FY26. This suggests pressure was largely seen in the mass segment. New launches remain a focus area. It launched Colgate Kids Squeezy Toothpaste in two flavours in Q1FY26 and MaxFresh Mouthwash Sachet Stick in fresh tea flavour.
Still, a combination of weak sales, high raw material expenses and staff costs meant Ebitda dropped 11% year-on-year, faster than the drop in revenue, to ₹452.5 crore. The upshot: Ebitda margin dipped 241 basis points to 31.6%.
To be sure, an immediate pick-up in growth appears tough amid stiff competition and sustained tepid urban demand. A high base for Q2 can put pressure on growth in the current quarter, post which an improvement can be expected as the base becomes more favourable.
Nomura expects Colgate to see recovery in sales and margins from the second half of FY26, although it maintains its ‘reduce’ rating on the stock, forecasting only a 7.7% earnings per share (EPS) CAGR over FY26-28, which is at the low end of the range for the broking firm’s coverage universe.
Given this, it doesn’t help that Colgate’s valuations are steep, with the shares trading at about 43 times estimated FY26 earnings, as per Bloomberg.
The stock is already derated, and requires growth pick-up or else it will likely remain range-bound, said a Jefferies India report on 22 July. The broking firm has cut its EPS estimates by 6-7%, mainly to factor in the continued moderation in growth. Thus, tracking volume performance is crucial hereon.
