Shares of Procter & Gamble Hygiene and Health Care Ltd were trading more than 2% higher in early deals on Thursday on the National Stock Exchange. The reason is simple. The company announced its year- and quarter-ending June results and its performance has been encouraging.
The company saw 19% year-on-year growth in its revenues in the last financial year, which is nothing to sneeze at. “This is the second year in the preceding three years that it has reported topline growth of over 19%," said analysts from Motilal Oswal Financial Services Ltd. The broker further added, “Thus, after losing momentum in the three years between FY16 and FY18, after the CEO change, the company seems to be back at the 19–20% topline CAGR trajectory seen over FY08–15." CAGR is short for compound annual growth rate.
According to P&G Hygiene, during the fiscal, both feminine care and healthcare businesses saw double-digit growth and grew ahead of their categories. The company's feminine care brand, Whisper, accounts for a good proportion of its sales and is typically rather resilient.
For the June quarter, higher costs played spoilsport even as revenues have increased by a robust 24% year-on-year. Note that Ebitda (earnings before interest, tax, depreciation and amortization) margin contracted as much as 786 basis points (bps) year-on-year to 9.5%. One basis point is one-hundredth of a percentage. This is at a time when gross margin has expanded by 520bps. A steep rise in advertising & sales promotion expenses is the main culprit that has weighed on the Ebitda performance.
Meanwhile, the company has declared a final dividend of ₹80 per share, taking the total dividend for the full year to ₹315 per share. This includes ₹85 per share interim dividend and a special dividend of ₹150 per share.
So far this calendar year, the P&G Hygiene stock has appreciated by around 20%. “With only around 20% penetration in feminine hygiene products (about 67% of P&G Hygiene’s FY20 sales), coupled with dominant market leadership and considerable moats, the growth opportunity remains immense," point out Motilal Oswal’s analysts. Even so, the stock’s gain this year, may limit significant upsides in the near-term. The stock trades at around 45 times estimated earnings for financial year 2023.
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P&G Hygiene ends fiscal on strong note; stock’s valuations pricey - Mint
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