MOSL: P&G HYGIENE AND HEALTHCARE (Buy)-Sales disappoint; margin surprise lead to profit beat
P&G HYGIENE AND HEALTHCARE: Sales disappoint; margin surprise lead to profit beat
(PG IN, Mkt Cap USD6.2b, CMP INR14302, TP INR17450, 22% Upside, Buy)
- PGHH's sales growth of ~5% was lower than our expectation, albeit on a base of 18.5% growth. While the company does not share segment-wise numbers in its interim results, it is likely that high Healthcare segment sales growth in the base quarter may have led to modest sales growth in 1QFY22 (June year-end company). The Healthcare segment had grown by ~24% in FY21, partly aided by the COVID-19 wave, leading to strong sales growth for all Healthcare products.
- EBITDA margin, at 28.5%, was well ahead of our expectation of 23.9%, leading to an EBITDA/PAT beat v/s our expectations.
- Its medium term topline and earnings growth prospects remain best of breed. We maintain our Buy rating on the stock.
Sales miss, margin surprises
- In 1QFY22, sales grew 4.8% YoY to INR10.6b (est. INR11.6b), with adjusted EBITDA* up 31.4% to INR3b (est. INR2.8b), adjusted PBT growing 29.6% to INR2.9b (est. INR2.8b), and adjusted PAT growing 27.3% to INR2.2b (est. INR2.1b) (*see next page for clarification).
- Ad spends grew sharply (36.8% YoY) to INR1.2b, while employee/adjusted other expenses declined by 8.7%/21.8% to INR562m/INR2.2b.
- Gross margin expanded by 50bp YoY to 66.5%.
- As a percentage of sales, ad spends grew 270bp YoY to 11.7%, employee costs declined by 80bp to 5.3%, and adjusted other expenses fell 720bp to 21.1%, leading to a 580bp expansion in adjusted EBITDA margin to 28.5% (est. 23.9%) in 1QFY22. Over the last three years, the ad spends-to-sales ratio has been between 10% and 11%.
- On a two-year CAGR basis, sales/EBITDA/PAT grew 11.4%/28.6%/26.3%.
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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