Colgate-Palmolive (India) Ltd’s March quarter (Q4) results imply that the sharp growth recovery seen in the December quarter, with adjusted sales growing 19% and volume by 12%, was chiefly a low base effect.

The March quarter saw Colgate’s sales rise by 5.1% while volumes rose by 4%. That is underwhelming compared to the sales growth numbers reported by its peers. Hindustan Unilever Ltd’s (HUL’s) volume increased by 11%, while those of Dabur India Ltd rose 7.7%.

It appears that while Patanjali Ayurved Ltd’s sales growth may have slowed down, that has not benefited Colgate. In fact, another large competitor Dabur’s oral care sales rose by 11% with toothpaste sales rising by 13.7% in the March quarter. Even HUL said that its oral care category was back to growth during the quarter. So it’s not just Patanjali—Colgate’s other rivals too seem to be muscling in on its turf.

This can be seen from its volume market share, which matters most for a consumer goods firm. In FY18, it said its toothpaste market share was 53.4%, down from 55.1% a year ago, while its toothbrush market share was 44.8% as against 47.4%. That’s a sizeable decline and remains a concern for investors.

The one thing that is going in Colgate’s favour is its ability to grow its profitability, with its Ebitda (earnings before interest, tax, depreciation and amortization) margin rising by 84 basis points sequentially to 28.2%.

The fact that value sales are growing ahead of volume growth is also a good sign, and could be attributed to a better product mix. The company’s Ebitda rose by 25% and its profit after tax by 40.6% since its tax liability remained unchanged due to reversals of prior provisions.

Colgate remains an expensive stock despite all its troubles in holding on to its market share. It trades at 49 times its FY18 earnings and 44 times its FY19 estimated earnings (based on estimates polled by Reuters). The recent run-up in its shares indicates that investors appear to be thinking that the worst may be behind it. Reports of Patanjali’s sales growth slowdown could lend credence to this view too.

Colgate’s results don’t show any convincing signs of this however and more than profitability gains, a revival in sales growth is what investors should look for. Its shares were 4% up on Monday over the previous close before the results were announced, but closed with a loss of 1.3%.

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