According to Credit Suisse, Colgate is facing a stiff competition in the dental cream category by Patanjali as despite fairly limited distribution the herbal brand enjoys a 4 to 5 per cent market share.
Credit Suisse has downgraded Colgate Palmolive to neutral and reduced target price to Rs 1000 per share. Shares of the company fell 2 per cent.
The brokerage thinks that Baba Ramdev-promoted Patanjali poses a potential threat to Colgate’s growth. It has also slashed FY17-18 earnings estimates by 3 to 7 per cent.
“Colgate’s volume growth has seen a significant drop in FY16, which is divergent from peers who are seeing steady volume growth. The key reason in our view is the strong traction that Patanjali has gained in the category,” it says in a report.
According to Credit Suisse, Colgate is facing a stiff competition in the dental cream category by Patanjali as despite fairly limited distribution the herbal brand enjoys a 4 to 5 per cent market share. It feels that that Patanjali’s share may cross double digits in toothpaste category over the next few years after it expands distribution in 2016.
However, the good news is Colgate’s earnings may see a decent CAGR of 17 percent over FY16-18 riding on low input costs, likely gain from GST and lowering of marginal tax rate. Low volume growth may cap upside on the stock, Credit Suisse warns.
At 09:31 hrs Colgate Palmolive (India) was quoting at Rs 910.00, down Rs 16.80, or 1.81 percent on the BSE. – Moneycontrol Bureau
