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Mixed quarter but decent overall yearly performance...

About the stock: Procter & Gamble Health Limited is a leading Pharma cum OTC company with key focus on Vitamins Minerals Supplement (VMS) category

* It has legacy brands in the VMS category like Neurobion, Polybion, Evion (all vitamins), Livogen (iron supplement), Nasivion (nasal decongestant), Seven Seas (vitamin- substitute for malt based health drinks)

* This company was earlier known as Merck Limited and was a part of Merck KGaA, Germany. In 2018 it (as a Consumer Health Business) was acquired by P&G.

Q4FY21 Results: PGHL reported mixed set of Q4FY21 results.

* Sales were up 41.9% YoY to | 285.4 crore

* EBITDA in Q4FY21 was at | 48 crore, down 8.8% YoY with margins at 17%

* Consequent PAT was at | 33.9 crore (down 30.6% YoY)

What should investors do? PGHL share price has grown by ~7.5x over the past five years (from ~| 728 in Aug 2016 to ~| 5530 levels in Aug 2021).

* We change our rating from HOLD to BUY rating on the stock given the good overall FY21 performance and decent growth potential for its power brands

Target Price and Valuation: We value PGHL at | 6555 i.e. 45x P/E on FY23E EPS

Key triggers for future price performance:

* P&G’s strong distribution channel and strong brand recall are likely catalysts for future growth

* MNC pharma traits like strong brand stickiness, growth, earnings visibility, consistency (despite quarterly fluctuations) in performances, strong b/s

* Key differentiator for PGHL is that its core category is VMS, which, as a therapeutic category, is likely to be rediscovered due to increased awareness post the current pandemic.

Alternate Stock Idea: Apart from PGHL, in our healthcare coverage we like Abbott.

* Abbott India is one of the fastest growing listed MNC pharma companies. It has outperformed the industry on a consistent basis in women’s health, GI, metabolic, pain, CNS among others

* BUY with target price of | 20360

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