Credit Suisse upgrades Colgate India to outperform on GST tailwinds

MUMBAI: Credit Suisse has upgraded shares of Colgate Palmolive India to outperform from neutral as it expects the toothpaste maker to see reduction in indirect taxation under Goods and Services Tax from the current taxation of 25-26%.

The brokerage has upgraded earnings estimates for FY18 and FY19 by 3-6% and raised target price on Colgate to Rs 1,150 from Rs 1,000.

"The stock has underperformed peers, being flat YoY, which should now start reversing," it said.

The government on Thursday announced GST rates, and said that some items of mass consumption currently taxed at 25-28% will be moved to the lower slab of 18%.

"While they have not explicitly given the final list, products like soaps, hair oils and toothpaste. We see a very strong possibility of toothpaste being in the 18% rate slab," said Credit Suisse in a note.

For Colgate, the major competitive edge is that competitors Dabur and Patanjali will not benefit from the same as they are already enjoying exemptions, it added. Colgate does not have exemptions on its manufacturing units and pays 25-26% indirect taxes on its toothpaste sales.