MOSL: P&G HYGIENE AND HEALTHCARE (Neutral)-Sales growth momentum sustains-margins below expectations
P&G Hygiene and Healthcare: Sales growth momentum sustains; margins below expectations
(PG IN, Mkt Cap USD4.9b, CMP INR10416, TP INR9860, 5% Downside, Neutral)
- 3QFY19 (June-ending) net sales witnessed third consecutive quarter of strong sales revival at 22.9% YoY to INR7b (v/s est. of INR6.5b). EBITDA was in line at INR1.44b (down 1.9% YoY) and PAT was slightly below expectations at INR903m (v/s est. of INR928m), up 8.3% YoY. Management mentioned that adjusted for GST impact in the base quarter, sales growth was ~15%.
- Gross margins contracted 630bp YoY to 57.7%, likely due to (a) impact of 10% price cuts taken in Whisper Choice Ultra, and (b) absence of input tax credit under GST for sanitary napkins. Adspend declined off a high base by 270bp YoY to 10.0% of sales. Adspend costs had shown a robust increase in each of the preceding four quarters. Employee costs to sales were down 80bp YoY to 4.9% of sales, while other expenses to sales were up 240bp YoY to 22.1% of sales, leading to 520bp decline in EBITDA margins to 20.5% (v/s est. of 22.0%) in 3QFY19.
- 9MFY19 performance: Net sales were up 19.6% YoY to INR23.1b, EBITDA was flat at INR5.4b, while Adj. PAT grew 3.3% YoY to INR3.5b.
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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