MOSL: P&G HYGIENE AND HEALTHCARE (Buy)-Payout of INR12b cash a huge boost to return ratios
​P&G Hygiene and Healthcare: Payout of INR12b cash a huge boost to return ratios
(PG IN, Mkt Cap USD3.7b, CMP INR7373, TP INR8760, 19% Upside, Buy)
- Net sales rose 5.5% YoY (est. of +9%) to INR5.73b. Sales growth, albeit lower than estimated, is still better than that reported by peers so far. Gross sales were up by a healthy 7% YoY. The company has not shared segmental data; however, in our view, close to double-digit sales in Feminine Hygiene was offset by flat growth and higher excise in Healthcare, leading to moderate net sales growth. EBITDA margin expanded 230bp YoY to 26.8% v/s estimate of 210bp contraction due to fear of a high base. EBITDA increased by 15.3% YoY (est. of +0.1%) to INR1.54b and PAT by 2.6% YoY (est. of -2.4%) to INR996m.
- EBITDA margin surprises positively: Gross margin shrunk 60bp YoY to 58.6% in the quarter. Staff costs rose 100bp YoY to 5.8% of sales, ad spend was down 20bp YoY to 9.4% of sales (far lower decline than that reported by all other consumer peers so far), and other expenses declined 360bp YoY to 16.6% of sales (a key factor driving margin expansion).
- Dividend payout a huge positive: The company declared a significant interim dividend of INR362 per share (5% yield), utilizing entire cash balance built up over two years via a sharp reduction in inter-group lending, good operating performance and a low payout. We believe that this portends further decline in inter-group lending as well as significantly elevated dividend payout.
Procter & Gamble Hygiene and Health Care Limited is an India-based company, which is engaged in the manufacturing and selling of branded packaged fast moving consumer goods in the femcare and healthcare businesses. The Company offers ayurvedic products and sanitary napkins. The Company is involved in manufacturing, trading and marketing of health and hygiene products. The Company's brands include Ambi Pur, Ariel, Duracell, Gillette, Head & Shoulders, Olay, Oral-B, Pampers, Pantene, Tide, Vicks, Wella and Whisper. The Company's products include ointments and creams, cough drops, tablets, personal products and toilet preparations, among others. The Company's products are sold through retail operations, including mass merchandisers, grocery stores, membership club stores, drug stores, department stores and high frequency stores. The Company has its manufacturing locations at Goa and Baddi in Himachal Pradesh, apart from third-party manufacturing locations spread across India.
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