Procter & Gamble Hygiene and Healthcare Ltd. (PGHH) is one of those FMCG companies, which although has only premium brands, has been successful in generating topline growth through price increases. The company’s brands ‘Whisper’ and ‘Vicks’ are leaders among their respective categories.
In the past five years the company has grown its revenues at a CAGR of 10% while profits have grown at a faster rate of 25%. Further the company’s ad spend ratio of 7.8%, for the year ended June 1999, has actually declined from a level of 10.1% in June 1998.
This is comparable among its peers in the industry. It has the highest profit margins among its peers in the FMCG industry. The premium margins are due to its value added products. The company has continuously improved its margins in the past five years from 14.6% in FY96 to 21.5% now. However, the interesting fact is that it has one of the lowest valuations within the FMCG sector.
Comparative profit margins
OPM(excl. other income)
Advt. as a % to sales
The main factor, which seems to have held back the company’s valuations is the presence of the parent’s wholly owned subsidiary Procter & Gamble Home Products Ltd. (PGHP) It has been observed that the parent is introducing new products through PGHP. As a result, the stock’s P/E, which has been in the range of 35-40 times historically, has come off considerably. In the future the company is likely to face stiff competition from the international players and low priced products. The re-rating in the stock would depend on the company’s ability to maintain its financial performance keeping pace with the latest technology adoption.
Procter & Gamble Hygiene and Health Care has announced the first quarter results of the financial year ended June 2017 (1QFY17). The company's sales rose by 12.5%YoY while net profit rose by 50.1% YoY during the quarter.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407