P&G Hygiene and Healthcare
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
PG IN
32
334.6 / 4.4
12700 / 8500
-6/-4/-6
74
25 August 2020
4QFY20 Results Update | Sector: Consumer
CMP: INR10,309
recent years
TP: INR10,450 (+1%)
Neutral
Sales better than expected; margins buck weak 4Q trend of
Financials & Valuations (INR b)
Y/E March
2020 2021E 2022E
Sales
30.0 32.7 37.6
Sales Gr. (%)
1.9
9.0 14.9
EBITDA
6.2
7.4
8.8
Margins (%)
20.6 22.7 23.4
Adj. PAT
4.4
5.4
6.5
Adj. EPS (INR)
136.5 167.0 199.0
EPS Gr. (%)
8.0 22.4 19.1
BV/Sh.(INR)
356.7 390.2 430.0
Ratios
RoE (%)
42.9 44.8 48.6
RoCE (%)
44.5 46.3 50.1
Valuations
P/E (x)
75.5 61.7 51.8
P/BV (x)
28.9 26.4 24.0
EV/EBITDA (x)
52.7 43.1 36.1
Div. Yield (%)
1.0
1.3
1.5
Shareholding pattern (%)
As On
Jun-20 Mar-20
Promoter
70.6
70.6
DII
13.2
12.9
FII
2.6
2.8
Others
13.6
13.7
FII Includes depository receipts
Performance significantly better than expected
P&G Hygiene and Healthcare (PGHH) reported flat sales in 4QFY20 (June
year-end), which came as a pleasant surprise given the lockdown-related
disruptions seen during the quarter. Operating margins also bucked the
trend of very steep decline in margins in 4Q v/s the preceding three
quarters, something that was witnessed in FY18 and FY19. Accordingly,
significant EBITDA and PAT beat was reported v/s expectations.
While the structural opportunity remains attractive in both the Feminine
Hygiene and Healthcare segments, valuations are fair at 51.8x June FY22
EPS. Maintain
Neutral.
PGHH’s sales for 4QFY20 were flat YoY at INR6.3b
(est.: INR5.6b), with
EBITDA growing 70.2% YoY to INR1.1b (est.: INR759m) and PBT rising 83.2%
YoY to INR1.1b (est.: INR695m).
Adj. PAT grew 13.9% YoY to INR692m (est.: INR493m) on higher tax in
4QFY20.
Ad spends declined 41.5% YoY to INR411m, employee expenses grew 43.6%
YoY to INR381m, whereas other expenses were flat YoY at INR2.1b.
Gross margins expanded 430bp YoY to 63.2%.
As a percentage of sales, ad
spends declined by 450bp YoY to 6.5%, employee costs rose by 180bp YoY
to 6%, and other expenses were down by 30bp YoY to 33.4%. This led to a
720bp expansion in EBITDA margins to 17.4% (est.: 13.5%) in 4QFY20.
FY20 sales/EBITDA/PAT grew by +1.9%/+1.4%/+8% YoY.
On an average basis, receivables/inventory/creditors increased by 1/5/7
days, resulting in the cash conversion cycle improving to -20 days in FY20
from -18 days in FY19.
Short-term loans and advances declined 93% YoY, while long-term loans
and advances increased marginally. This possibly indicates a further
reduction in inter-group lending to the unlisted entity, which has been
significantly curtailed in recent years.
Cash flow from operations increased by 14.8% YoY to INR4.7b in FY20.
The company has declared dividend of INR105 per share on reported EPS
of INR133, leading to a payout of 79%.
Amid this unprecedented crisis, PGHH is prioritizing the health and safety of
its employees and maximizing the availability of its products, which play an
essential role in meeting the daily health and hygiene needs of its
consumers across the country.
FY20 performance
Jun-19
70.6
11.2
3.4
14.8
Highlights from management commentary
Krishnan Sambamoorthy – Research analyst
(Krishnan.Sambamoorthy@MotilalOswal.com)
Research analyst: Dhairya Dhruv
(Dhairya.Dhruv@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.