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P&G – Can it sustain growth? - Views on News from Equitymaster
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  • Aug 16, 2000

    P&G – Can it sustain growth?

    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
    Particulars PGHH HLL Britannia SBCH Cadbury Nestle
    OPM(excl. other income) 21.5% 12.0% 7.5% 18.4% 14.6% 15.2%
    NPM 13.7% 10.2% 4.5% 13.2% 7.1% 6.9%
    Advt. as a % to sales 7.8% 7.1% 6.6% 5.4% 10.2% 6.5%

    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.

    Comparative valuations
      PGHH HLL Britannia SBCH Cadbury Nestle
    Year Ended June 30 Dec 31 March 31 Dec 31 Dec 31 Dec 31
    Market Price (Rs) 657.8 236.3 699.0 444.0 587.3 465.1
    Market Cap. to Sales (x) 2.9 5.1 1.6 2.8 4.1 2.9
    Price / Earnings Ratio (x) 20.1 48.5 36.0 20.6 53.3 41.9



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    More Views on News

    P&G: Strong Core Growth (Quarterly Results Update - Detailed)

    Dec 9, 2016

    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.

    P&G: Strong Core Performance (Quarterly Results Update - Detailed)

    Oct 5, 2016

    Procter & Gamble Hygiene and Health Care reported a 0.1% YoY growth in sales and a 2.2% YoY increase in net profits during the quarter ended June 2016.

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    Aug 9, 2017

    While GST implementation brought down volumes and profitability in the short run, Marico remains optimistic in the long run.

    P&G: A Stable Quarter (Quarterly Results Update - Detailed)

    May 6, 2016

    Procter & Gamble Hygiene and Health Care reported an 11% YoY increase in revenues, while profits rose by 12% YoY during the quarter.

    P&G: Margins Go Through the Roof (Quarterly Results Update - Detailed)

    Feb 9, 2016

    Procter & Gamble Hygiene and Health Care reported an 11% YoY increase in revenues, while profits rose by 62% YoY during the quarter.

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    Aug 18, 2017 (Close)


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