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P&G: Good all-round growth
Apr 26, 2010

Procter & Gamble Hygiene and Health Care Ltd. has announced its 3QFY10 results. The company has reported a 15.5% YoY and 25.4% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Topline for Procter & Gamble Hygiene and Health Care Ltd. (PGHH) grew by a robust 15.5% YoY during the quarter. This growth comes on the back of strong performance by the company’s healthcare and feminine hygiene segment.
  • Operating (EBITDA) margins for the company increase by 3.4% to stand at 21.3%. This improvement in operating margins was due to lower costs of goods sold and lower advertisement expense as a percentage of sales. Operating margins were capped due to higher staff costs and higher other expenditure as a percentage of sales.
  • Net profit for the quarter increased by a robust 25.4% on the back of higher operating income and lower effective tax rate.
  • Net profit for 9mFY10 increased by 29.4% while net profit margins increased by 2%. This strong performance was a result of growth in operating profit partly offset by lower other income and higher effective tax rate.


Rs(m) 3QFY09 3QFY10 Change 9mFY09 9mFY10 Change
Net sales 1,778 2,054 15.5% 5,927 7,062 19.1%
Expenditure 1,461 1,617 10.7% 4,491 4,959 10.4%
Operating profit (EBDITA) 317 437 37.7% 1,436 2,104 46.5%
EBDITA margin (%) 17.8% 21.3%   24.2% 29.8% 22.9%
Other income 178 169 -4.9% 311 276 -11.5%
Interest - 0   - 0  
Depreciation 38 45 18.4% 103 150 45.8%
Profit before tax 458 562 22.7% 1,645 2,229 35.5%
Extraordinary inc/(exp) - -   - -  
Tax 109 125 14.3% 334 532 59.4%
Profit after tax/(loss) 348 437 25.4% 1,311 1,697 29.4%
Net profit margin (%) 19.6% 21.3%   22.1% 24.0%  
No. of shares (m) 32 32   32 32  
Diluted earnings per share (Rs)*         67.0  
*trailing twelve months

What has driven performance in 3QFY10?
  • The strong performance of PGHH was due to a good performance by both its feminine hygiene and health care segments. Feminine hygiene grew by 16% YoY during the quarter on the back of Whisper Choice, Whisper Maxi and Whisper Ultra. On the other hand, the health care business grew by 15% YoY led by strong growth of VICKS cough drops and VICKS vaporub.

  • Operating income for the quarter grew by 37.7% YoY. This was because PGHH was able to benefit from fall in raw material prices and lower advertisement expenditure as a percentage of sales. Costs of goods sold increased marginally by 0.6% YoY while advertisement expenditure was up by 6.7% YoY. The growth in operating income could have been higher but for increase in staff costs and higher other expenditure. Staff costs increased by 27% YoY while other expenditure increased by 25.6% YoY.

  • Net profit margins increased by 1.7% to stand at 21.3%. This growth came on the back of higher operating profits and lower effective tax as a result of income tax saving from operating plants and income tax free zones. Effective tax rate for 3QFY10 was 22% as against 24% during the corresponding quarter last year. Net profit could have been higher but for lower other income which fell by 5%.

    Cost break-up
    As a % of net sales 3QFY09 3QFY10 9mFY09 9mFY10
    Total Cost of goods 31.8% 27.7% 30.5% 31.3%
    Staff Cost 6.5% 7.1% 5.5% 5.2%
    Advertising 23.3% 21.5% 17.6% 15.7%
    Other Expenditure 20.6% 22.4% 22.2% 18.0%

What we expect?
At a price of Rs. 2,015, the stock is trading at 26 times our estimated FY12 earning. The company is the market leader in both the segments it operates in. We believe that the company has great growth potential because of its presence in the feminine hygiene market which remains under penetrated. However, the valuations of the company have run up quite a bit from a 2-3 year perspective and hence we are CAUTIOUS on this stock.

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