On Thursday, BofA Securities upgraded Colgate-Palmolive (NYSE:CL) India (CLGT:IN) from Underperform to Buy, despite reducing the price target to INR2,955.00 from the previous INR3,070.00. The upgrade comes after a notable decline in the company’s stock price, which has seen a roughly 30% drop over the past four months.
Analysts at BofA Securities believe the current valuation offers a favorable risk-reward scenario for investors. They pointed out that Colgate India’s management has been actively working on strategies aimed at boosting the consumption in their product categories and moving towards more premium products.
The stagnation in market share for Colgate’s toothpaste segment appears to have ceased, which is a positive sign for the company. BofA Securities highlighted that Colgate India is expected to achieve a high single-digit compound annual growth rate (CAGR), driven by a balanced mix of volume and pricing growth. This is in line with the company’s management projections and is expected to bring Colgate’s growth in alignment with the sector’s expansion.
The analysts also noted that Colgate India’s growth trajectory now positions the company to perform comparably to the sector’s growth, a significant change from previous years when it lagged behind its peers. This shift could lead to Colgate India maintaining higher relative valuations than it has historically achieved over the past 5 to 10 years.
Furthermore, BofA Securities mentioned the potential for Colgate India to diversify into non-oral care categories, either organically or through acquisitions. The company’s CEO has indicated that expanding the product portfolio, potentially including more products from Colgate’s global offerings, is a priority. This strategic move is seen as a key opportunity for growth by the analysts.
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