MOSL: P&G HYGIENE AND HEALTHCARE (Neutral)-Growth disappoints, given weak base-balance sheet metrics improving
P&G Hygiene and Healthcare: Growth disappoints, given weak base; balance sheet metrics improving
(PG IN, Mkt Cap USD4.6b, CMP INR9195, TP INR9303, 1% Upside, Neutral)
- 2QFY18 net sales grew 9.5% YoY (against our estimate of 19% YoY) to INR7.0b. EBITDA declined 8% YoY (against our estimate of 6% YoY growth) to INR2.1b. Adjusted PAT declined 12.9% YoY (against our estimate of flat PAT) to INR1.3b. Management called out strong performance in both Feminine Hygiene and Healthcare, but sales were expected to be higher on weak base.
- Since gross and EBITDA margins for base quarter 2QFY17 were unusually high; we were expecting 380bp EBITDA margin decline. Operating margin decline was steeper than expected at 570bp YoY to 29.9%. Gross margin declined 350bp YoY to 60.1%. Encouragingly, ad spend to sales grew by 110bp YoY and by 24% YoY in absolute terms. This expense has been lower than expected in recent quarters. Other expenses increased 120bp YoY to 16.6%. Other income declined sharply due to massive dividend payout in May 2017.
- 1HFY18 highlights: Net sales grew 9.5% YoY to INR13.6b. EBITDA increased 4.7% YoY to INR4b.EBITDA margin declined 130bp YoY to 29.2%. PAT declined 3% YoY to INR2.5b.
- Balance sheet improves: There was a sharp improvement in working capital YoY primarily because of 10% decline in inventory levels YoY and a sharp 46% increase in trade payables YoY. Trade receivables increased by 11% YoY, in line with sales growth. Negative working capital increased sharply YoY.
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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