Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
P&G: Core delivery - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

P&G: Core delivery

Feb 4, 2008

Performance summary
  • Strong growth in core business leads to the topline growth of 21% YoY in 2QFY08.
  • Margins fall marginally in 2QFY08 on account of higher raw material costs.

  • Bottomline grew by 54% YoY and 45% YoY in 2QFY08 and 1HY08 respectively.

(Rsm) 2QFY07 2QFY08 Change 1HFY07 1HFY08 Change
Net Sales 1,608 1,941 20.8% 2,911 3,454 18.7%
Expenditure 1,069 1,295 21.2% 2,037 2,330 14.4%
Operating Profit (EBDITA) 539 646 20.0% 874 1,124 28.6%
Operating Profit margin (%) 33.5% 33.3%   30.0% 32.5%  
Other Income 31 35 14.6% 74 78 6.2%
Interest - -   0 0  
Depreciation 20 28 45.6% 39 54 39.0%
Profit before Tax 550 653 18.8% 909 1,149 26.3%
Tax 248 189 -23.7% 352 341 -3.1%
Profit after Tax/(Loss) 302 464 53.6% 558 808 44.9%
Net profit margin (%) 18.8% 23.9%   19.2% 23.4%  
No. of Shares (m) 32.5 32.5   32.5 32.5  
Diluted Earnings per share (Rs)*         35.3  
P/E Ratio (x)*         21.8  
*(trailing 12 months)

What has driven performance in 2QFY08?
  • The topline for 2QFY08 grew by 21% YoY led by strong growth in the feminine hygiene business (up 23% YoY), while the health care segment reported a 15% YoY growth. The feminine hygiene segment contribution to total sales increased to 44% form 42% in 2QFY07. 100% localization of ‘Femcare’ production resulted in full range store availability leading to higher growth.

    Cost break-up
    As a % of net sales 2QFY07 2QFY08 1HFY07 1HFY08
    Total Cost of goods 21.8% 27.6% 23.3% 26.8%
    Staff Cost 4.1% 3.5% 4.8% 4.6%
    Advertising 10.8% 9.4% 11.6% 9.0%
    Other Expenditure 29.8% 26.2% 30.3% 27.2%

  • Inspite of lower labour, ad and other expenses (as a % of sales), the margins declined by 20 basis points in 2QFY08 on account of higher raw material prices, which increased to 28% as a % of sales from 22% in 2QFY07. For 1HY08, the margins are at 32.5% YoY, which are above our estimates.

  • Bottomline grew by 54% YoY in 2QFY08. However, it is not comparable as prior years’ tax adjustment of Rs.107 m was added in the previous year. Without this adjustment PAT grew by strong 13% YoY. For 1HY08, the bottomline grew by 21.5% YoY without the tax adjustment.

What to expect?
At the current price of Rs 769, the stock is trading at a price-to-earnings multiple of 13.9 times our FY10 estimates. With strong brands and sector potential, the company is expected to do well. It is also increasing its capacity to meet the demand. Considering the growth potential, we had recommended a ‘Hold’ with a target price of Rs 992 from a FY10 perspective in November 2007. We maintain our view.

To Read the Full Story, Subscribe or Sign In
To Read the Full Story, Subscribe or Sign In

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms


Feb 18, 2019 (Close)


  • Track your investment in P&G HYGIENE with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks