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P&G: Focus paying off - Views on News from Equitymaster
 
 
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  • Nov 13, 2001

    P&G: Focus paying off

    P&G Hygiene & Healthcare Limited (P&G), continues to face difficult market conditions due to the economic sluggishness. In the recently declared September quarter results the company recorded a 3% decline in topline YoY.

    (Rs m) 1QFY01 1QFY02 Change
    Net Sales 1,201 1,161 -3.3%
    Other Income 14 32 127.7%
    Expenditure 920 868 -5.6%
    Operating Profit (EBDIT) 281 293 4.1%
    Operating Profit Margin (%) 23.4% 25.2%  
    Interest 1 0  
    Depreciation 73 63 -13.4%
    Profit before Tax 221 261 18.4%
    Tax 35 65 85.0%
    Profit after Tax/(Loss) 185 196 5.8%
    Net profit margin (%) 15.4% 16.9%  
    No. of Shares (eoy) (m) 21.6 21.6  
    Earnings per share* 34.3 36.2  
    *(annualised)      
    Current P/e ratio   11.7  

    But the performance was not all that bad considering that the company managed to control costs and thus increased its operating margins by 180 basis points to 25.2%. P&G's staff cost declined over 8% YoY and its raw material costs were also pruned by nearly 8%.

    Cost break-up
    (Rs m) 1QFY01 1QFY02 Change
    Raw material cost 437 403 -7.8%
    Staff cost 93 85 -8.3%
    Sales tax/excise 107 110 3.5%
    Other expenses 284 270 -4.7%
    Total expenditure 920 868 -5.6%

    Lower depreciation and zero interest saw P&G's profit before tax improve by over 18%. However, higher taxes as a result of new deffered tax guidelines saw net profit grow marginally by 6%. But on the whole it was a satisfactory performance considering the difficult market conditions and the company's two-product strategy (Vicks and Whisper).

    At the current price of Rs 424 the stock trades at a P/E of 13x our projected FY02 earnings estimates. Given the company's focus on operational efficiencies, the valuation is on the lower side. This is probably because of the company's two product dependence as well as concerns regarding the parent's 100% subsidiaries. But apart from this, the company is likely to be one of the key players in both anti-cold and feminine hygiene segment. The company's dividend payout is also attractive.

     

     

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