Neutral P & G Hygiene and Healthcare Ltd for the Target Rs. 11,000 by Motilal Oswal Financial Services Ltd
Subdued quarter with an all-round miss
* P&G Hygiene and Healthcare’s (PGHH) 4QFY26 revenue declined by 5% YoY (miss). In the last four quarters, the revenue growth trajectory has been flat.
* Gross margin expanded 190bp YoY but contracted 450bp QoQ to 62.1%, reflecting the usual volatility between quarters. Employee costs rose 15% YoY, A&P was up 9% YoY, and other expenses fell 18% YoY. EBITDA margin expanded 200bp YoY but fell 870bp QoQ to 23.2%. EBITDA grew 4% YoY to INR2.2b (est. INR2.4). PGHH delivered 17% EBITDA growth in the last four quarters.
* PGHH exhibits significant volatility on a quarterly basis, but its annual performance remains stable. We model 27.0-27.5% EBITDA margin during FY27 and FY28.
* We model a CAGR of 8% each in revenue/EBITDA/PAT over FY26-28E. Given the volatility in margins, we find other consumer names relatively better than PGHH for the growth outlook at valuation it offers. We maintain Neutral with a revised TP of INR11,000 (based on 35x Mar’28E EPS).
Miss on all fronts; revenue down 5%
* Revenue down 5%: PGHH registered 5% YoY decline in revenue to INR9.4b (est. IN10.3b). Revenue growth has been weak for the last few quarters.
* Volatile quarterly margins: Gross margin expanded 190bp YoY to 62.1% (est. 63%). GM volatility between quarters is always high. Employee costs rose 15% YoY, A&P was up 9% YoY and other expenses fell 18% YoY. EBITDA margin expanded 200bp YoY to 23.2% (est. 23.4%).
* Muted profitability: EBITDA grew 4% YoY to INR2.2b (est. INR2.4b). PBT grew 3% YoY, while adj. PAT declined 2% YoY to INR1.5b (est. INR1.9b).
Valuation and view
* We cut our EPS estimates by 3-4% for FY27 and FY28.
* Two factors make PGHH an attractive long-term core holding: 1) high growth potential for the feminine hygiene segment, coupled with the potential for market share gains and strategic initiatives, including the strengthening of its competitive advantages; and 2) the potential to sustain high operating margins from the long-term premiumization trend in the feminine hygiene segment.
* With a portfolio of essentials and healthcare, PGHH remains focused on product innovation-led customer acquisition. While penetration play will continue, it is expected to proceed at a stable pace despite the high scope of user additions. Further, we do not see any medium-term upside trigger.
* We model a CAGR of 8% each in revenue/EBITDA/PAT over FY26-28E. Given the volatility in margins, we find other consumer names relatively better than PGHH for the growth outlook at valuation it offers. We maintain Neutral with a revised TP of INR11,000 (based on 35x Mar’28E EPS).
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