8 November 2021
Update | Sector: Consumer
P&G Hygiene and
Healthcare
BSE SENSEX
60,546
S&P CNX
18,069
CMP: INR14,371
TP: INR17,450 (+21%)
Strong broad-based topline growth; ad spends to
stabilize at lower levels
Buy
Stock Info
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
466.5 / 6.3
15147 / 9881
4/-16/-4
129
Financials Snapshot (INR b)
Y/E March
2021 2022E
Sales
35.7 39.2
Sales Gr. (%)
19.1
9.6
EBITDA
7.0 10.0
Margins (%)
19.5 25.7
Adj. PAT
5.1
7.4
Adj. EPS (INR)
156.1 228.4
EPS Gr. (%)
13.4 46.3
BV/Sh.(INR)
220.0 242.9
Ratios
RoE (%)
54.1 98.7
RoCE (%)
60.1 104.6
Valuations
P/E (x)
92.6 63.3
P/BV (x)
65.7 59.5
EV/EBITDA (x)
66.3 46.1
Div. Yield (%)
2.2
1.4
2023E
46.3
18.2
12.6
27.1
9.4
288.4
26.3
271.7
112.1
118.8
50.1
53.2
36.7
1.8
Shareholding pattern (%)
As On
Sep-21 Jun-21 Sep-20
Promoter
70.6
70.6
70.6
DII
13.5
13.6
13.5
FII
2.6
2.5
2.5
Others
13.3
13.3
13.4
FII Includes depository receipts
Here are the key takeaways from P&G Hygiene and Healthcare (PGHH)’s FY21
Annual Report:
Feminine Hygiene and Healthcare segments report strong growth:
PGHH
continued to strengthen its brand fundamentals with innovation, product
launches, distribution expansion, and superior communication and execution.
Sales grew 19.1% YoY in FY21, led by the Feminine Hygiene (66% of sales; up
16.7% YoY) and Healthcare (33.1% of sales; up 24.1% YoY) segments. The
company does not share segmental data as a part of its quarterly results.
Ramping up category development:
Since 1995, the Whisper school program
has educated more than 25m girls across India on menstrual hygiene. PGHH
supported 40,000 schools, educating ~6m adolescent girls on the importance
of menstrual hygiene in FY21 – despite the pandemic – via digital means. It
plans to reach over 8m girls annually within the next three years. The
company is committed to doubling the program’s impact by covering 50m girls
within the next few years. This initiative is an important part of category
development by PGHH, the category leader in the Feminine Hygiene segment,
which has penetration levels of just ~20% in India.
Vicks continues to gain market share in each of its sub-segments:
PGHH
continued to gain share in the Cough & Cold category, with strong offtake
growth across sub-brands in the portfolio – VapoRub and BabyRub (61% of
healthcare sales), cough drops (32%), and tablets (7%). Growth was driven by
a) a superior go-to-market strategy, with an enhanced presence in stores with
more visibility touchpoints per store, b) increased market share in the Cough
& Cold category, and c) innovation backed by strong communication
campaigns.
Gross margin increases sharply:
Some years ago, PGHH outsourced the
manufacturing of its Vicks products to P&G’s other entities. This has led to
lower material costs, but subsequently higher processing charges. We believe
this is a key factor that has largely contributed to the reduction in RM costs
(32.4% of sales in FY21 from 36.9%/42% in FY20/FY19) for the company in
recent years.
Investments in higher ad spend in line with P&G’s global strategy:
The
company’s aggression in branding since FY18 was ramped up further in FY21.
The company increased ad spending in FY18 and FY19 (10.6% of sales for both
years). This continued in FY20 (10.9% of sales) and increased even further to
14.6% of sales in FY21, in line with P&G’s global strategy to boost ad spends
during the pandemic. We believe ad spends are likely to normalize at 11–12%
of sales in subsequent years.
Krishnan Sambamoorthy – Research analyst
(Krishnan.Sambamoorthy@MotilalOswal.com)
Research analyst: Dhairya Dhruv
(Dhairya.Dhruv@motilaloswal.com) /
Kaiwan Jal Olia
(kaiwan.o@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.