P&G: Margin sacrifice led growth - 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: Margin sacrifice led growth

Apr 25, 2003

After a staid first half of FY03, P&G Hygiene & Healthcare Limited (P&G) has finally shown signs of strength in its March quarter numbers. The company has reported a strong 17% topline growth during this quarter. The company has compromised its operating margins (albeit marginally) to propel topline growth.

(Rs m) 3QFY02 3QFY03 Change 9m FY02 9m FY03 Change
Net Sales 816 956 17.1% 3,232 3,386 4.8%
Other Income 19 36 90.0% 142 89 -37.4%
Expenditure 637 755 18.6% 2,389 2,470 3.4%
Operating Profit (EBDIT) 179 200 12.0% 843 916 8.6%
Operating Profit Margin (%) 21.9% 21.0%   26.1% 27.0%  
Interest 0 0 - 0 1 -
Depreciation 37 25 -31.9% 158 87 -44.8%
Profit before Tax 161 211 31.1% 826 916 10.9%
Extraordinary items 0 -3 - 4 -16 -
Tax 40 60 49.0% 208 237 14.0%
Profit after Tax/(Loss) 121 148 22.4% 623 663 6.5%
Net profit margin (%) 14.8% 15.5%   19.3% 19.6%  
No. of Shares (eoy) (m) 21.6 21.6   21.6 21.6  
Earnings per share* 22.3 27.3   38.4 40.9  
Current P/e ratio   13.7     9.2  

Aided by almost no interest burden and lower depreciation provisioning (down 32%), the company has managed to report over 22% bottomline growth, despite a 49% growth in tax provisioning. Depreciation provisioning has gone down as the company sold its Hyderabad factory assets to a contract manufacturer in January 2003.

On a nine month basis, P&G has reported a 5% topline growth and a staid 7% bottomline growth. The significant dip in operating margins becomes apparent if one compares it against the 9mFY03 numbers (where OPM stood at 27%). It indicates that P&G has been forced to cut pricing of its products in a bid to sell more. And this seems to have worked for the company this quarter.

as a % of sales 3QFY02 3QFY03 9m FY02 9m FY03
Increase/(decrease) in stock in trade -6.7% -2.9% 0.7% 1.9%
Raw material/packaging cost 30.6% 29.2% 29.2% 29.0%
Raw material cost 11.9% 10.8% 7.5% 7.4%
Staff cost 8.6% 9.9% 7.3% 8.1%
Other expenses 33.8% 32.2% 29.2% 26.5%
Total expenditure 78.1% 79.0% 73.9% 73.0%

Sales of P&G's core categories, i.e., Health Care (Vicks) and Feminine Hygiene (Whisper) grew by 25% during the quarter, as compared to an overall 8% growth in 9mFY03. In 9mFY03 so far, Vicks has grown by 5% and Whisper business by 13%. The growth in Whisper has largely been spearheaded by Whisper Ultra.

The company has recorded a significant growth in other income (90%) and this has propelled the bottomline in 3QFY03. We believe that P&G's sell off of its Hyderabad factory, for which P&G Singapore reimbursed the company, seems to have increased cash in the company, leading to higher other income. In the nine months comparision, other income for last year includes around Rs 73 m as extraordinary income, and therefore the dip in other income during 9mFY03.

At the current price of Rs 375 the stock trades at a P/E of 9.2x 9mFY03 annualised earnings. The valuation is on the lower side of the FMCG spectrum. This is probably because of the company's two product focus, as well as concerns regarding the parent's other 100% subsidiaries.

Equitymaster requests your view! Post a comment on "P&G: Margin sacrifice led growth". Click here!


More Views on News

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.

P&G HYGIENE Announces Quarterly Results (2QFY20); Net Profit Down 5.0% (Quarterly Result Update)

Nov 11, 2019 | Updated on Nov 11, 2019

For the quarter ended September 2019, P&G HYGIENE has posted a net profit of Rs 1 bn (down 5.0% YoY). Sales on the other hand came in at Rs 9 bn (up 7.6% YoY). Read on for a complete analysis of P&G HYGIENE's quarterly results.

P&G HYGIENE 2017-18 Annual Report Analysis (Annual Result Update)

Dec 31, 2018 | Updated on Dec 31, 2018

Here's an analysis of the annual report of P&G HYGIENE for 2017-18. It includes a full income statement, balance sheet and cash flow analysis of P&G HYGIENE. Also includes updates on the valuation of P&G HYGIENE.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

I Recommended this Stock over Page Industries because it's Relevant to Doubling Your Income (Profit Hunter)

Sep 7, 2020

Things are not often what they seem in the market and how you can take advantage of this.

The NASDAQ Whale Could Harm Your Portfolio (Fast Profits Daily)

Sep 7, 2020

The discovery of Softbank pushing up prices on the NASDAQ will cause volatility in the market. Stay alert!

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 18, 2020 (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