Motilal Oswal's research report on Procter and Gamble Hygiene and Healthcare
While the sales decline of 3.7% YoY in 4QFY22 (adjusted for a one-off in other operating income) was optically poor, it was on an unusually high base of Vicks sales in FY21 (24.1%) that may have been especially strong in 4QFY21 given the second wave of Covid-19. Even so, the two-year sales CAGR, which has been in the 12-17% range in the preceding three quarters, stood at only 9.2% in 4QFY22. As a percentage of sales, PGHH’s ad spends declined sharply by 1,190bp YoY to 12.8% from the unusually high levels of 4QFY21. In fact, A&P spends moderated in FY22 to 12.4% of sales v/s 14.1% in FY21, which was when P&G chose to increase its ad spends globally rather than curtail marketing spends amid the pandemic. We believe A&P will continue to decline, reaching the 10-11% of sales level going forward. The company has strong earnings growth potential, led by a healthy revenue growth and gradual normalization of the unusually high ad spends in the aftermath of the pandemic as well as the ongoing material cost pressures.
Outlook
We maintain our BUY rating. PGHH’s best-of-breed structural earnings growth potential and improving RoE deserve premium multiples. We maintain our BUY rating with a TP of INR16,500 (premised on 55x FY24E EPS).
More Info
At 09:52 hrs Procter and Gamble Hygiene and Health Care was quoting at Rs 14,190.00, down Rs 13.75, or 0.10 percent.
It has touched an intraday high of Rs 14,232.35 and an intraday low of Rs 14,100.00.
It was trading with volumes of 149 shares, compared to its thirty day average of 683 shares, a decrease of -78.20 percent.
In the previous trading session, the share closed down 0.07 percent or Rs 9.55 at Rs 14,203.75.
The share touched its 52-week high Rs 16,466.40 and 52-week low Rs 12,751.00 on 17 March, 2022 and 19 May, 2022, respectively.
Currently, it is trading 13.82 percent below its 52-week high and 11.29 percent above its 52-week low.
Market capitalisation stands at Rs 46,061.78 crore.
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