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Motilal Oswal Upgrades Colgate-Palmolive to 'Buy' with 25% Upside Target

Strategic Insights

— 1 min read

Colgate-Palmolive (India), after a dull spell, is predicted to undergo a turnaround by leading brokerage firm Motilal Oswal. The firm has upgraded the stock to a 'Buy' rating and set a target price of Rs 2,850, indicating a potential 25% upside from the current market levels. According to Motilal Oswal, Colgate's recent quarterly performance was subdued, but the company is well-positioned for recovery due to tax relief, improving demand trends, and a push toward premium products.

Key Takeaways:

  • Colgate's September quarter (Q2FY26) results reflected continued sluggishness, with revenue declining 6% year-on-year to Rs 1,520 crore, mainly due to trade disruptions and a high base effect.
  • Despite muted quarterly performance, Colgate's margins showed resilience, with gross margin expanding 100bp YoY and 60bp QoQ to 69.5% and EBITDA margin remaining flat YoY at 30.6%.
  • Colgate has continued to focus on premiumisation, investing heavily in its brands, which helped its premium portfolio outperform the mass segment.
  • The GST rate cut on oral care products from 18% to 5% has reduced tax for nearly 95% of Colgate's portfolio, benefiting its recovery momentum in the coming quarters.
  • Colgate is shifting gears toward sustainable revenue growth, backed by new product launches, marketing efforts, and deeper rural reach, with a focus on launching science-backed, premium innovations to enhance realisations.
  • Colgate's stock has underperformed over the past year, falling nearly 30%, making its valuation more reasonable, with the stock trading at a comfortable valuation of 40x P/E for FY27.
  • Motilal Oswal maintains a 'Buy' rating for Colgate with a target price of Rs 2,850 (45x Sep'27).

Statistics:

  • Revenue declined 6% year-on-year to Rs 1,520 crore in Q2FY26.
  • Gross margin expanded 100bp YoY and 60bp QoQ to 69.5% in Q2FY26.
  • EBITDA margin remained flat YoY at 30.6% in Q2FY26.
  • Colgate's premium portfolio outperformed the mass segment.
  • The GST rate cut on oral care products from 18% to 5% benefits nearly 95% of Colgate's portfolio.
  • Colgate's stock has underperformed over the past year, falling nearly 30%.

Sources:

  • IE Online Media Services Pvt. Ltd. (2025) - distributed by Contify.com

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