Stockgram

Shares of Colgate-Palolive (India) Ltd. declined nearly 6% on Thursday, May 22, in response to its fourth quarter results. With this, the stock has also slipped below the price target that brokerage firm Goldman Sachs has on the stock with a bearish view.





Colgate-Palmolive reported a weak quarter for the January-March period amidst a challenging macro environment. While revenue missed expectations, the Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and margins met already muted expectations.





Goldman Sachs has a "sell" recommendation on the stock with a price target of ₹2,630.





It said Colgate-Palmolive's fourth quarter was weak with its domestic revenue declining 1.8% from the previous year, which was also 3% below Goldman Sachs' estimates.





The company's earnings before interest, taxes, depreciation and amortisation (EBITDA), which declined 6% from the previous fiscal, was 5% ahead of the brokerage's estimate.





Colgate-Palmolive's EBITDA margin contracted by 170 basis points from the previous year, which was lower than expectations as there was a 130 basis points expansion in gross margin, Goldman Sachs said.





The contraction in EBITDA margin was driven by 60 basis points increase in employee cost, 100 basis points increase in ad spends and 130 basis points increase in other expenses, each as percent of the sales, the brokerage said.





Goldman Sachs went on to warn that the current competitive environment in the oral care business is likely to strain Colgate-Palmolive's margin expansion strategy.





Of the 34 analysts that have coverage on the stock, nine have a "buy" rating, 12 have a "hold" rating and 13 have a "sell" rating on the stock.





The stock declined 5.8% to hit an intraday low of ₹2,503.6 apiece on Thursday, May 22. The stock was down 5.5% at ₹2,512 apiece at 10.20 am.





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