P&G: Challenges ahead - Views on News from Equitymaster

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

  • MyStocks

MEMBER'S LOGINX

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

P&G: Challenges ahead

Mar 20, 2001

Procter & Gamble Hygiene and Healthcare Ltd. (PGHH) has witnessed a steep decline in its price over the last one-year. The company’s falling brand image and increasing competition is a real concern making the stock an under-performer. PGHH’s topline growth in the last two years slowed down to a single digit due to stiff competition in the markets from low priced packs. Also the unorgainsed sector gave a tough time to the company.

Its strategy of focusing on premium segment of the market has however led to a continuous improvement in its operating margins (25.8%), which are among the highest in the FMCG industry. While the company’s revenues grew at a compounded annual growth rate of 6.2% in the past 5 years, profits showed an encouraging growth rate of 27.5%.

Comparative margins
Companies OPM NPM
PGHH 26% 18%
HLL 14% 12%
Colgate 8% 5%
Nestle 17% 7%
Cadbury 17% 9%
SmithKline Consumer 16% 13%

PGHH’s focus on two brands is a concern considering the drop in the topline growth. During the first half of the year ended June ’01, the company’s sales inched up by just 1%. However, the company managed to put in a good performance by improving its operations. PGHH improved its operating margins by 360 basis points (3.6%) in the time frame of 6 months by controlling expenditure. It also pruned its debt burden. As a result, its interest costs were zero during the quarter. These operating and working capital efficiencies fueled its profits growth by 26% during the first half of the year.

At the current market price of Rs 590, PGHH is trading at a P/E of 14 times its June 2001 projected earnings, which is at a significant discount compared to its peers in the industry. Its markets cap to sales ratio of 2.5 times is however in line with other companies. The stock is given low valuation by the markets because the company is highly dependent on two brands. Global competitors in healthcare and feminine hygiene category are waiting in the wings to enter the Indian market with superior products based on the latest technology. PGHH is positioning itself to face the challenges by making operational changes and focusing on the long-term strategic benefits, which its present brand offers.

The risk of a limited product profile is not likely to affect PGHH's topline growth since the company is the market leader in both the brands and is continuously investing in brand promotion and innovation to maintain its position. For PGHH it is very challenging to bring back the real glory in both its main brands i.e. ‘Vicks’ and ‘Whisper’. Growth in both these brands would really bring the de-risking perception among the investors, and help re-rate its business from the present levels.

Stock performance
Particulars Price (Rs) 3 months 1 year 2 years
PGHH 590 -14.7% -1.2% -41.2%

Equitymaster requests your view! Post a comment on "P&G: Challenges ahead". Click here!

  

More Views on News

P&G HYGIENE Announces Quarterly Results (2QFY21); Net Profit Up 85.5% (Quarterly Result Update)

Nov 11, 2020 | Updated on Nov 11, 2020

For the quarter ended September 2020, P&G HYGIENE has posted a net profit of Rs 3 bn (up 85.5% YoY). Sales on the other hand came in at Rs 10 bn (up 18.5% YoY). Read on for a complete analysis of P&G HYGIENE's quarterly results.

Burger King IPO: Should You Subscribe to This QSR Chain Business? (IPO)

Dec 2, 2020

Does the company with one of the fastest-growing QSR chains in India have sound prospects?

P&G HYGIENE Announces Quarterly Results (3QFY20); Net Profit Up 9.5% (Quarterly Result Update)

Feb 17, 2020 | Updated on Feb 17, 2020

For the quarter ended December 2019, P&G HYGIENE has posted a net profit of Rs 1 bn (up 9.5% YoY). Sales on the other hand came in at Rs 9 bn (up 5.0% YoY). Read on for a complete analysis of P&G HYGIENE's quarterly results.

More Views on News

Most Popular

My Recent Recommendation Will Profit from the Global Supply Chain Crisis (Profit Hunter)

Mar 31, 2021

A tiny chemical company, started in the Licence Raj era, is a great example of a new wealth creating opportunity.

My Stock Trading Strategy (Fast Profits Daily)

Mar 31, 2021

In this video I'll show you exactly how I go about picking stocks for trading.

4 Stocks to Make Your Portfolio Immune to the Second Covid Wave (Profit Hunter)

Apr 6, 2021

Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.

If the Market Falls, I Will Do This... (Fast Profits Daily)

Apr 1, 2021

What should you do if the market falls? In this video, I'll tell you what I will do.

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

P&G HYGIENE SHARE PRICE


Apr 13, 2021 03:38 PM

TRACK P&G HYGIENE

  • 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

P&G HYGIENE - P&G COMPARISON

COMPARE P&G HYGIENE WITH

MARKET STATS