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Committed efforts underway to ensure sustained growth  

PGHH organized an analyst meet to share its performance over the years and here are the takeaways:

* P&G has achieved superior growth over the years through a strong portfolio of products, including superior packaging, brand communication, and retail execution. Its strategic integration of productivity measures led to substantial savings of approximately INR 1.05b in FY23.

* It holds over 50% market share in both Feminine Care and Health Care categories and 90% of the company products are natural and Ayurvedic.

* The market in which the company deals is still underpenetrated, offering ample opportunities for growth. The management expects mid-single digit volume growth over the next four to five years and believes that bottom-line growth will outpace the top-line growth.

* The company leverages AI and machine learning to enhance convergence, reduce non-movable inventories, improve consumer behavior analysis, and expand distribution reach.

* E-commerce and digital channels contribute significantly, now accounting for double-digit percentages of total revenue.

* Over the past decade, it has demonstrated superior and sustained execution with a CAGR of 9%/13% in Net sales/PAT for FY23. Additionally, its RoE has increased by 54% over FY13-23.

* The P&G Shiksha program has significantly improved the learning environment and empowered marginalized communities. Presently, it collaborates with 13 partners and positively impacts ~+35 lakh children

Valuation and view

* We are not making any material changes to our EPS estimates, considering the volatility in ad-spends and potential delays in gross margin recovery due to increased inventory levels, all amid fluctuations in pulp and oil costs.

* Two factors make PGHH an attractive long-term core holding: 1) substantial growth potential within the Feminine Hygiene segment (~65% of FY22 sales); this growth is further supported by the potential for the company to gain market share, aided by competitive advantages that the company is continuously strengthening, and 2) the potential for increased profitability through premiumization within the Feminine Hygiene segment over the long term.

* Nevertheless, the uncertain pace of sales and earnings recovery and expensive valuations of ~70xFY24E EPS/~57xFY25E EPS lead us to maintain our Neutral 12,000 rating. We value the stock at 55x Mar’25E EPS, arriving at a TP of INR16,940. 

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SEBI Registration number is INH000000412