MOSL: P&G HYGIENE AND HEALTHCARE (Neutral)-Sales growth disappoints again-higher ad-spend encouraging
P&G Hygiene and Healthcare: Sales growth disappoints again; higher adspend encouraging
(PG IN, Mkt Cap USD4.6b, CMP INR9200, TP INR9065, 1% Downside, Neutral)
- 3QFY18 net sales declined 0.9% YoY (est. of +12%) to INR5.7b. EBITDA fell 4.8% YoY (est. of +19%) to INR1.5b. Adj. PAT declined 8.2% YoY (est. of +16%) to INR914m. With no detailed information on the sales performance provided by PG, we believe that flat sales – despite a weak base – could be a result of weak winter sales of Vicks or possible loss of market share in Whisper.
- Gross margin expanded 540bp YoY to 64%. Encouragingly, adspend to sales grew by 330bp YoY and on absolute terms by 34% YoY. Other expenses increased sharply by 320bp YoY to 19.8%, possibly because of poor leverage on weak sales. EBITDA margin, thus, contracted 110bp YoY to 25.7%.
- Impairment loss: There was an impairment loss of INR126m (we have assumed to be INR82m post tax), which was recognized in P&L in 3QFY18. This was caused by the company moving its manufacturing from one location to another. These assets are now classified as held for sale.
- 9MFY18 highlights: Net sales rose 6% YoY to INR19.3b, EBITDA grew 2% YoY to INR5.4b (margin down 120bp YoY to 28.2%) and adj. PAT fell 4.6% YoY to INR3.4b.
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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