Shares of FMCG major Colgate-Palmolive India Ltd. ended nearly 3 percent higher on Monday after the company's management said that it is possible to achieve high-single-digit sales growth in financial year 2024.

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The company has posted better-than expected results in the quarter ended March 2023.

During the company's earnings call, the management said that gross and EBITDA margin are likely to see sequential improvement going forward.

However, it cautioned that doubling of media spends on Colgate's Strong Teeth higher advertising and publicity (A&P) spends in the June quarter may limit the EBITDA margin expansion.

Meanwhile, brokerage house CLSA has given an "Outperform" rating on Colgate-Palmolive India with a target of Rs 1,610 per share.

The brokerage said that lower spending on advertising and publicity leads to higher margins, but category growth is still slow. It further said that top-line growth remains slow, and margins surprised on the upside, primarily due to lower A&P spending. Moreover, dependence on oral care is still high with limited visibility on growth.

Another brokerage house Nomura has recommended a "neutral" rating on Colgate with a target price of Rs 1,650 per share.

Nomura said that the company's operating profit margin is all-time high, but volumes declined for the fifth quarter in a row. Also, anaemic sales growth and rural weakness weighing down on category growth, the brokerage observed.

Higher investments and execution will be key to Colgate's four pillar growth strategy.

The FMCG firm reported a 2.3 percent decline in net profit in the quarter ended March 2023 as compared to the year-ago period while revenue surged 4 percent during the period.

Further, the company earned total revenue of Rs 1350.6 crore in the quarter under review, which was higher than the poll estimates of Rs 1,347 crore.

The firm spent 10.6 per cent sales on advertising in the quarter under review as compared to 11.3 per cent in the year ago period. Also, the company's gross margins were at 66.9 per cent as compared to Rs 66.8 per cent in the year-ago period.

Shares of Colgate-Palmolive ended 2.8 percent higher at Rs 1,673.10.

First Published:May 15, 2023 4:08 PM IST