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We recently participated in Gillette India Ltd. (GILL’s) Investors & Analysts Call held by the management to highlight company's performance, strategies and business outlook. Key takeaways: 1) Market growth improving but management remains cautiously optimistic, 2) Near-term cost pressure still not receded but aim is to grow bottom-line faster than topline, 3) Gillette’s market share gain faster in last 18 months and now stands at highest ever level of >60%, 4) Within the large female hair removal market, razors (GILL’s focus area) as a subsegment have seen fastest growth in last three years, 5) Parent expects India to deliver consistent double-digit growth and become one of the top contributors of topline and bottom-line for the company globally. While this is a softer aspect, we consider management now addressing investors & analysts as a positive. We now assign a target multiple of ~51x on June’25 EPS (3yr/5yr avg fwd. multiple ~53x/65x), arriving at a target price (TP) of Rs6,650 (Rs6,090 earlier). Maintain ADD rating.

Comments on recent performance and outlook

Quoting syndicated data for the industry, management sees FMCG consumption to be the fastest in latest quarter compared to past 6 quarters. Volume growth is finally returning. Rural growth is also inflecting well. Management still remains cautiously optimistic about the market growth outlook at the moment. In its latest fiscal as well as quarterly performance, GILL’s saw its profits growing stronger than topline driven by premiumization, pricing and an overall cost-reduction program. Commodity prices remain high for GILL, and it has not seen the cost pressures receding as expected. Average cost of two out of top three key commodties for GILL was still higher in FY23 vs FY22, and they are not showing signs of receding. This means bottom-line pressures will remain. Given the price volatility, GILL expects the recovery to take longer than the immediate 9-12 months. Company still aims to grow bottom-line ahead of topline in the foreseeable future to fund innovation, raise the bar on superiority, and absorb macro headwinds

Grooming – Gillette seeing share gain faster post Covid

GILL has been consistently growing share for the past few years, but post Covid share growth has been faster, especially in the past 18 months. Gillette’s market share currently is at the highest ever level, upwards of 60%. In the recent past, there has been a trend not only towards men growing beards, but also towards men grooming their beards. The category is undergoing a transformation, and this presents an opportunity for GILL to play in premium systems and trimmers. Female hair removal is a large market, but razors compete with creams, in-home waxes and salons. GILL’s focus has been on the in-home hair removal segment. In the last 3 years, razors as a subsegment have seen fastest growth. Venus India has grown 10X in past 10 years

India - an important market for P&G globally

India is among top 10 markets for P&G globally. In fact, P&G Global COO has gone on record stating that he expects India to deliver consistent double-digit growth and become one of the top contributors of top-line and bottom-line for the company globally.

Appliances - relatively small category but likely to grow in future

Appliances is a relatively small category and less than 2% of the category in value. While the consumer habit is evolving, the shift to electronic razors is relatively small but likely to grow in future. Currently, Braun range is available primarily on ecommerce and digital platforms.

Distribution – making further headway digitally

GILL has expanded direct reach by over 65% vs 5 years ago. Currently, it is making headway with SMART distribution, an in-house developed artificial intelligence and machine learning algorithm that analyzes consumer behavior and pattern to customize a range of P&G products at a store level (improving availability along with optimizing inventory and reducing non-moving stock). With this, the company has transitioned from a cluster-based planning to a store/neighborhood-based planning. It is also raising the bar on e-commerce and digital presence. (e.g. e-commerce vendors offering subscription deals on Gillette).

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