MOSL: P&G HYGIENE AND HEALTHCARE (Downgrade to Neutral)-GST led destocking impacts sales
​P&G Hygiene and Healthcare: GST led destocking impacts sales; Downgrading to Neutral on fair near term valuations
(PG IN, Mkt Cap USD4.1b, CMP INR8155, TP INR8800, 8% Upside, Downgrade to Neutral)
- 4QFY17 Net sales (June year-end) declined 5.8% YoY (est. of +7.6%) to INR5b. EBITDA declined by 17.7% YoY (est +2.7%) to INR 1.31b. Adj PAT declined by 28.6% YoY (est. +6%) INR 780m. GST led destocking and higher than expected depreciation and tax rates affected profitability.
- EBITDA margins declined by 380bp YoY to 26.1% in 4QFY17 off a high base as against our expectations of 130bp YoY decline. The operating margin decline was led by gross margins which declined by 390bp YoY to 61.6%. Other expenses increased by 330bp YoY as percentage to sales, while there was 240bp/100bp reduction on staff costs and on A&P.
- Full year FY17 results- Being a June year end company P&GHH witnessed the impact of both demonetization and GST related destocking in a single financial year, unlike peers. The company therefore did a fair job to grow full year sales/EBITDA and PAT at 2%/10% and 2% respectively. Nevertheless weak FY17 base augurs well for recovery going forward.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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