Colgate-Palmolive India: Nomura maintains 'Buy', cuts target price to Rs 2,175

What happened

Nomura kept its 'Buy' rating on Colgate-Palmolive India but cut its target price to Rs 2,175 from Rs 2,550, citing higher advertising and promotional spending and lower earnings estimates. Second-quarter sales grew 12.3% year on year, while advertising spending rose 40%.

Confirmed

Global impact / market context

Higher advertising spending pulls money away from operating profit, which is profit from core sales before interest and taxes. That directly raises costs and lowers reported profit, while Nomura still expects the spending to support premium products and steady volume growth.

Analyst inference

The rating stays positive even as the target price falls, showing analysts see spending as an investment rather than a problem. Sales growth of 12.3% missed consensus estimates near 13% to 14%, which may limit how much investors pay for the stock.

Analyst inference

What to watch

1. Advertising spending rose 40% year on year in the second quarter as Colgate-Palmolive India promoted premium products using themes such as Harry Potter oral care, Bluey toothpaste and athlete partnerships. Confirmed
2. Nomura expects the increased spending to support premiumisation, which means selling higher-priced products, and to sustain high-single-digit volume growth even while near-term profitability remains under pressure. Proposed
3. Watch whether volume growth holds near 8% and whether advertising spending cools, because sustained high spending would keep costs elevated and hold operating profit growth below sales growth. Analyst inference

Evidence

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