Colgate-Palmolive India stock falls on revenue miss and growth concerns

Investing.com -- Shares of Colgate-Palmolive (NYSE:CL) India tumbled 6.4% as the company reported a revenue miss for the fourth quarter, with earnings before interest, taxes, depreciation, and amortization (EBITDA) declining by 6% year-on-year (YoY) to approximately Rs5 billion. The results were impacted by muted urban demand and increased competition, particularly in the fourth quarter, contrasting with stronger rural growth.

The company’s overall revenues saw a 2% YoY decline, with volumes flattening after experiencing more than 5% growth in the previous three quarters. Despite price hikes at the maximum retail price (MRP) level, realization growth was negative, which management attributed to high trade discounts, indicating heightened competition.

Nevertheless, the premiumization trend continued, supported by new product launches. For the fiscal year 2025, revenues grew by 6% YoY with mid-single-digit volume growth in toothpaste, while realization growth remained moderate due to higher trade investments.

Gross margins expanded by approximately 130 basis points YoY to 70.4% in the fourth quarter, which management credited to cost-saving initiatives and modest inflation. Yet, EBITDA margin contracted by 166 basis points YoY to more than 34%, although this was an improvement over forecasts. Advertising expenditures increased by 7% YoY after a slight decline in the previous quarter.

Urban markets are experiencing a slowdown, while rural markets continue to perform well. Within the urban segment, demand from the top 30% of households remains strong, driving momentum in premium products, but the remaining 70% of households face pressures that affect overall volumes.

Looking ahead, management expects a gradual demand recovery, with a pickup anticipated in the second half of fiscal year 2026. The company plans to focus on driving top-line growth, primarily through volume, and will introduce more products from its global portfolio.

In fiscal year 2025, most new product launches were in the premium segment. The Visible White Purple now accounts for 25% of the Visible White portfolio, with significant traction in electronic and quick-commerce platforms. Management even highlighted this as the most successful innovation of the last decade. Premium products now make up over half of Colgate’s e-commerce business.

The company also relaunched Strong Teeth in February 2025 with an improved formulation, which it claims is superior to the competition. Management expects the premium portfolio to grow four times the rate of the oral care market.

In light of these developments, analysts from Jefferies commented on the stock’s future, stating, "we believe the stock may be range-bound unless there is a pick-up in growth."

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