- Colgate delivered 2% YoY revenue growth in Q3 FY26, breaking a three‑quarter decline.
- Toothpaste volume fell ~2% despite price hikes, lagging Dabur’s 10% surge.
- Stock down ~25% over 12 months, now trading around 38x FY27 P/E.
- Motilal Oswal maintains a BUY rating with a target of INR 2,450 (40x Dec’27 earnings).
- Key questions: Is the price‑driven rebound sustainable? How do peers react?
You missed Colgate’s modest rebound, and you might be leaving money on the table.
Colgate’s Q3 FY26 Revenue: What the 2% Growth Really Means
Colgate’s reported revenue of INR 14.9 billion matched consensus forecasts, delivering a modest 2% year‑over‑year increase after three consecutive quarters of contraction. The headline suggests a turnaround, but the underlying drivers tell a more nuanced story. The uplift stems primarily from a strategic price increase rolled out in early FY26, which lifted average selling prices by roughly 5% across the oral‑care portfolio. While price elasticity in the Indian market is historically low for premium brands, the modest growth indicates that price alone cannot offset weakening demand.
Pricing vs. Volume: Why the Toothpaste Segment Still Stumbles
Toothpaste, Colgate’s flagship product, contracted by about 2% in volume, sharply missing analysts’ expectations of a 1% rise and a steep ~5% decline seen in Q2 FY26. The volume dip reflects lingering consumer price sensitivity, intensified competition, and a shift toward value‑oriented brands. Even with the price hike, the net effect on revenue was muted because the volume decline ate into the headline growth. In contrast, Dabur’s toothpaste line surged 10% YoY, leveraging aggressive promotional spend and a broader flavor portfolio that resonated with price‑conscious shoppers.
Sector Pulse: How the Indian Oral Care Landscape Is Shifting
The Indian oral‑care market, worth over INR 80 billion, is entering a maturity phase. Urban saturation, rising health awareness, and a burgeoning middle class have pushed the sector toward premiumisation, yet price remains a decisive factor in tier‑2 and tier‑3 cities. Recent trends show a tilt to niche segments—whitening, herbal, and Ayurvedic variants—where Dabur, Himalaya, and emerging private‑label players are gaining share. For Colgate, sustaining growth will require balancing premium pricing with volume‑preserving innovations.
Peer Comparison: Dabur, Hindustan Unilever, and the Race for Toothpaste Share
Dabur’s 10% YoY toothpaste volume growth underscores a successful execution of value‑add bundles and localized flavor launches. Hindustan Unilever (HUL), while a smaller toothpaste player, has leveraged its extensive distribution network to hold steady market share, focusing on cross‑category promotions. Both peers have maintained modest price hikes while protecting volume through aggressive trade discounts. Colgate’s higher price point, coupled with weaker volume, puts it at a comparative disadvantage unless it introduces compelling new formats or expands its value‑oriented sub‑brands.
Valuation Deep Dive: Is 38x P/E Justified?
At a current price‑to‑earnings (P/E) multiple of roughly 38x for FY27 and 35x for FY28, Colgate trades at a premium to the Indian consumer‑goods average of about 28x. The forward‑looking P/E assumes earnings acceleration driven by pricing power and cost discipline. However, the earnings model is vulnerable to any reversal in volume trends. If toothpaste volume continues to slide, earnings could plateau, rendering the multiple excessive. Conversely, if the company can translate price hikes into sustained top‑line growth and improve operating margins, the premium may be warranted.
Historical Patterns: Past Turnarounds and What Followed
Colgate experienced a similar modest rebound in FY22 after two quarters of decline, driven by a 4% price increase. The subsequent year saw a 7% volume recovery as promotional activity aligned with price adjustments, leading to a 15% share‑price rally. However, the upside was short‑lived; a macro‑slowdown in FY24 erased gains, and the stock fell 20% from its peak. The pattern suggests that price‑only strategies deliver temporary relief, but lasting upside requires product‑line innovation and volume‑supporting tactics.
Investor Playbook: Bull vs. Bear Cases
Bull Case: The price hike stabilizes margins, and the company rolls out a new herbal‑toothpaste range that captures price‑sensitive consumers, driving volume back to growth. Improved cost efficiencies and a favorable foreign‑exchange environment boost earnings, justifying the 40x target and delivering a multi‑year total return above 20%.
Bear Case: Volume contraction persists, competition intensifies, and price sensitivity erodes margins. Earnings stagnate, forcing the P/E multiple to compress toward the sector average, pulling the stock down 15‑20% from current levels.
Given the current valuation cushion and the upside potential from a successful product‑innovation cycle, a measured allocation to Colgate could be rewarding, provided investors monitor volume trends and peer promotional activity closely.