Procter & Gamble Q1 results: While valuations at 44.3x FY23E EPS are in line with staples peers, the company has a stronger topline and earnings track record, best-of-breed structural earnings growth potential, Motilal Oswal said.
Procter & Gamble Hygiene & Health Care | The company reported profit at Rs 48.98 crore in Q4FY21 against Rs 69.21 crore in Q4FY20, revenue rose to Rs 786.6 crore from Rs 634.53 crore YoY. The company has recommended a final dividend of Rs 80 per equity share (nominal value of Rs 10 each), for the financial year ended June 30, 2021.
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Procter and Gamble Hygiene and Health Care share price gained over 2 percent intraday on August 26 after the company declared its Q4 results.
The FMCG firm on August 25 reported a 29.2 percent decline in its net profit at Rs 48.98 crore for the quarter ended June 2021. The company, which follows the July-June financial year, had posted a net profit of Rs 69.21 crore in the corresponding period of the previous fiscal, it said in a regulatory filing.
However, revenue from operations rose 23.96 percent to Rs 786.59 crore as against Rs 634.53 crore in the April-June period last year. Revenue from operations for the full fiscal stood at Rs 3,574.14 crore.
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The stock was trading at Rs 13,430.00, up Rs 317.25, or 2.42 percent. It has touched an intraday high of Rs 13,451 and an intraday low of Rs 12,800.
Domestic research and broking firm Motilal Oswal suggests buying the stock with target of Rs 15,530 per share, an upside of 18 percent.
P&G Hygiene and Healthcare ended FY21 (June year-end company) with 19.1% sales growth. 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. For a non-discretionary company, this is very strong topline momentum, the brokerage firm said.
“With only ~20% penetration in feminine hygiene products (~67% of PGHH FY20 sales), coupled with dominant market leadership and considerable moats, the growth opportunity remains immense,” it added.
Two factors make the stock an attractive long-term core holding – huge category growth potential in the feminine hygiene segment (~67% of FY20 sales), coupled with potential for market share gains due to considerable moats, and potential for higher margin gains from premiumization in the feminine hygiene
segment over the long term.
“While valuations at 44.3x FY23E EPS are in line with staples peers, the company has a stronger topline and earnings track record, best-of-breed structural earnings growth potential, and strongly improving RoEs that deserve premium multiples. We maintain our buy rating, with target of Rs 15,530 per share,” it added.
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