Mumbai: Shares of Colgate-Palmolive (India) Ltd traded flat on Tuesday on the National Stock Exchange, having risen 5% on Monday.
In an introductory meeting on Friday, a few analysts met the new managing director, Ram Raghavan, and came back fairly enthused.
“We like Raghavan’s plans to drive category growth (increasing usage in rural and not just driving penetration) and premiumisation agenda," said analysts from ICICI Securities Ltd in a report on 13 September.
Raghavan highlighted that growth was back on the agenda. Here, even as profitable growth is important, revenue growth will be the priority.
The competitive intensity remains high in the toothpaste category and Colgate has suffered due to this, losing market share over the last few years. Particularly, competition from Patanjali Ayurved Ltd’s products has hurt Colgate.
“We see him possibly doing a lot more in the naturals and premium spaces while simultaneously strengthening the core franchise," pointed out analysts from JM Financial Institutional Securities Ltd in a report on 13 September.
The company is set to launch black-coloured toothpaste with bamboo charcoal, as part of its strategy to focus more on the naturals segment. It has, however, highlighted that the naturals and premium categories are not mutually exclusive.
While, a new management has instilled confidence, concerns remain.
“The danger we see is that of the Street extrapolating the Nestle experience here though one cognises that it takes quite a bit to change things on the ground. Nestle’s stock has doubled since Suresh Narayanan took charge even as earnings per share (ex-Maggi crisis impact) is up just 40-45% (trailing twelve months vs CY14)," said JM Financial analysts.
At the same time, it’s not as if Colgate’s valuations are comforting. Currently, Colgate shares trade at around 41 times estimated earnings for this financial year, which is pricey. Going ahead, investors will allocate brownie points on improvement in market share.