Procter & Gamble Hygiene & Health Care Ltd
(BSE Code: 500459) (CMP: Rs.10011.95) (FV: Rs.10) By Amit Kumar Gupta
Founded in 1964, Mumbai-based Procter & Gamble Hygiene & Health Care Ltd (P&G) manufactures and sells branded packaged fast moving consumer goods (FMCG) in the femcare and healthcare businesses. It offers ayurvedic products and sanitary napkins and is also involved in the manufacture, trade and marketing of health and hygiene products. Its brands include Duracell, Gillette, Head & Shoulders, Oral-B, Pampers, Pantene, Tide, Vicks, Wella, Whisper, etc. Its product portfolio comprises ointments and creams, cough drops, tablets, personal products and toilet preparations, etc, which are sold through retail operations including mass merchandisers, grocery stores, membership club stores, drug stores, department stores and high frequency stores.
The management has been aggressive in the recent quarters on increase in ad spends, new launches and price cuts, wherever required. Arresting the dip in Whisper’s market share, it achieved growth in this segment over the past six months. The distribution of Vicks and Whisper increased to 3.5 million outlets and 2 million outlets respectively, from 2 million and 1.4 million outlets four years ago. Vicks has continuously gained market share. Its new product ‘Vicks Baby Rub’ which was launched in FY18 is also doing very well.
The recent change at the CEO level has made P&G more dynamic than in the recent past. P&G intends to launch its sanitary napkin recycling program in 10 major cities across the world by 2030 with India being one of the priority countries with launch in 2019. It also aims to use 100% renewable or recyclable materials for its products and packaging, cut greenhouse gas emissions by half, power its plants with 100% renewable energy and source at least 5 billion liters of water from circular sources and design products.
While we wait to see if 20% sales growth witnessed in Q1FY19 is sustainable, there seems little doubt that revenue and earnings growth prospects of the company are seeing a revival after a couple of tepid years. While valuations of 51.7x FY20 EPS implies that the near-term upside is limited, two factors make P&G an attractive long-term core holding: (1) huge category growth potential in the Feminine Hygiene segment (~67% of sales) and potential for market share growth because of its considerable moats; and (2) potentially huge margin gains from premiumization in Feminine Hygiene over the longer term. Increasing pace of distribution expansion, continuing strong pace of category development efforts in schools to boost awareness and growth, rising ad spends after a lull in preceding years, healthy pipeline of new products and willingness to take price cuts whenever required to boost growth are all encouraging developments that should aid rapid growth for P&G over the long term.
Technical Outlook: The P&G share looks good on the daily chart for medium-term investment. It has broken out of the ascending triangle pattern formed on the daily chart. The stock trades above all important moving averages like the 200 DMA level on the daily chart. Start accumulating at this level of Rs.10011.95 and on dips to Rs.9500 for medium-to-long term investment and a possible price target of Rs.10250+ in the next 6 months.