PROCTER & GAMBLE

HYGIENE AND HEALTH

CARE LIMITED
Case Study

13th June 2024

ABOUT THE COMPANY

Procter & Gamble Hygiene and Health Care Limited is engaged in manufacturing, distributing and marketing branded packaged fast
moving consumer goods in the feminine care and healthcare businesses. To cater to these businesses, it offers different category of
products across its brands which includes Whisper, Vicks VapoRub, Vicks Throat Drops, Vicks Action 500 Advanced, Vicks Inhaler, Vicks
BabyRub and Old Spice. Apart from third party manufacturing locations spread across India, it has its manufacturing units in Goa and
Baddi in Himachal Pradesh. The products are sold through retail operations including mass merchandisers, grocery stores,
membership club stores, drug stores and department stores.

The healthcare products segment includes ointment and creams, cough drops and tablets. During the year, the company introduced
new products in the category, which has been the market leader with a 48% market share in the cough, cold and hay fever category of
OTC (over the counter) products.

Under the feminine care segment, it includes feminine hygiene products and other skin care products with offerings like sanitary
napkins, deodorants and related ayurvedic products.

CASE STUDY
ABOUT THE COMPANY

Portfolio Mix (FY23) Healthcare Category As a % of Revenue (FY23)

Total: 3,918 cr Total: 1,246 cr

75, 6%

1,246, 32%
402, 32%
768, 62%
2,672, 68%

Healthcare Feminine Hygiene Ointment & Creams Cough Drops Tablets

CASE STUDY
GROWTH

SALES GROWTH
In FY23, the company witnessed a marginal growth in
sales by 0.4% YoY to ₹3,918 cr, owing to one-time
other operating income. Despite challenging
operational headwinds, it observed improving
growth across both the portfolios, particularly in the
healthcare segment (cough & cold category),
supported by premiumization and product
interventions during the period.
Revenue for 9M FY24 grew by ~7% YoY to ₹3,274 cr.
Company observed an increase on the back of
improving premiumization to meet evolving
customer needs and strong retail executions.
Going forward, distribution expansions would further
help to grow and gain market share coupled with
volume growth across different categories.

5 Year CAGR: 9.8% CASE STUDY

GROWTH

EBITDA GROWTH
In FY23, EBITDA grew by 5% YoY to ₹869 cr. Company
observed an improvement on account of moderation
across key commodities coupled with cost
productivity and pricing.
In 9M FY24, EBITDA was ₹852 cr, a growth of 30%
YoY.
Major expenses for the company constituted
purchase of stock-in trade 19% (mainly constitutes
raw materials and packing materials), cost of
materials consumed 18% and other expenses 31%
(majorly towards advertisement & marketing
expense).

5 Year CAGR: 4.5% CASE STUDY

GROWTH

PAT GROWTH
In FY23, PAT stood at ₹678 cr, a rise of 18% YoY.
Other income increased by 67% YoY, mainly towards
bank deposits. However, excluding a one-time tax
impact, the same grew by ~10% YoY.
In 9M FY24, PAT grew by 13% YoY to ₹594 cr, fueled
by product-price mix and moderating raw material
basket.

5 Year CAGR: 5.9% CASE STUDY

 GROWTH EDGE METER

An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating.
Since judgement on equity is subjective because different people will have different expectation from their investments, it
is better to study each aspect and give an individual grading to arrive at the final evaluation of a stock.

CASE STUDY
PROFITABILITY

EBITDA MARGIN
In FY23, EBITDA margin was 22%, an expansion of 90
bps YoY. Company observed an improvement on the
back of moderation in the key raw materials. The
major raw materials used by the company includes
wood pulp, cotton and viscose.

In 9M FY24, EBITDA margin expanded by 470 bps YoY

to ~26%, aided by moderation across key commodity
prices and a favorable portfolio mix.

CASE STUDY
PROFITABILITY

PAT MARGIN
In FY23, PAT margin was 17%, an expansion of 255
bps YoY.

PAT margin for 9M F24 expanded by 95 bps YoY to

~18%.

The company changed their business model from a

contract manufacturing company to a toll
manufacturing, thereby improving profitability.

CASE STUDY
PROFITABILITY

ROCE
In FY23, the ratio increased YoY, owing to an increase
in the profitability.

The company is actively exploring opportunities to

optimize borrowing costs and maximize yield on
investments. Further, better utilization of capital and
emerging categories in different segments would
help in improving the operating profit and ROCE of
the company.

CASE STUDY
PROFITABILITY

ROE
In FY23, the ratio increased to ~85% YoY. The
increase in the net worth was mainly on account of
increased profitability of the company.

The company is foraying across segments to grow

their core business by capitalizing on growing
consumer demands. This will help in improving the
profitability and return ratios of the company going
ahead.

CASE STUDY
 PROFITABILITY EDGE METER

An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating.
Since judgement on equity is subjective because different people will have different expectation from their investments, it
is better to study each aspect and give an individual grading to arrive at the final evaluation of a stock.

CASE STUDY
EFFICIENCY

CASH FLOWS
In FY23, the cash flow from operations stood at ₹826
cr, witnessing a growth of ~44% YoY. This was
primarily attributable towards significant increase in
financial assets and trade payables.

Cash outflow from investing activities stood at ₹10 cr.

This was largely spent across the acquisition of PP&E.

Cash outflow from financing activities was ₹477 cr in

FY23, primarily owing towards dividend payment.

CASE STUDY
EFFICIENCY

WORKING CAPITAL CYCLE

The working capital days has remained strong.

Days of inventory saw a decline during the year;

however payable days increased during the same
period.

CASE STUDY
EFFICIENCY

FREE CASH FLOW

Free Cash Flow (FCF) for FY23 stood at ₹264.2/ share.

For FY23, capex expenditure stood at ~₹44 cr, largely

attributable towards capacity expansion and
maintenance of existing manufacturing facilities.

CASE STUDY
EFFICIENCY

ASSET TURNOVER RATIO

The asset turnover ratio in FY23 decreased on
account of tepid growth in sales on a YoY basis.

Total assets increased from ₹1,683 cr in FY22 to

₹2,137 cr in FY23. The increase was primarily
attributable towards increase in non-current tax
assets and cash balances.

CASE STUDY
 EFFICIENCY EDGE METER

An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating.
Since judgement on equity is subjective because different people will have different expectation from their investments, it
is better to study each aspect and give an individual grading to arrive at the final evaluation of a stock.

CASE STUDY
SOLVENCY

DEBT TO EQUITY
The company has been debt free.

CASE STUDY
SOLVENCY

INTEREST COVERAGE RATIO

The interest coverage ratio of the company stood at
~74.8x in FY23, witnessing an increase YoY on
account of stable interest payments. Overall, the
EBIT is healthy enough to cover up the interest
obligations comfortably.

Major interest expense was primarily attributed

towards trade payables.

CASE STUDY
SOLVENCY

CURRENT RATIO
In FY23, the ratio increased to 1.38x, which implies
the company is in a favorable position to meet its
short-term liabilities.

Most of the current assets are in the form of cash

balances, inventories and trade receivables. While
most of the current liabilities comprise of
outstanding dues of creditors other than small and
micro enterprises.

As on 31st December 2023, the company had cash &

bank balance of ₹702 cr.

CASE STUDY
 SOLVENCY EDGE METER

An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating.
Since judgement on equity is subjective because different people will have different expectation from their investments, it
is better to study each aspect and give an individual grading to arrive at the final evaluation of a stock.

CASE STUDY
VALUATION

PE RATIO
PGHH is currently trading at TTM PE multiple of
73.78x.

Going forward, one of the key drivers for the

company would be improving productivity by
prioritizing the health of the consumers. With
continuous development through new and
innovative products, leveraging consumer sentiment
and behavior to maximize premiumization would
further help them to meet demands.

New launches across its portfolio, improving existing

products would help in improving the earnings.

CASE STUDY
VALUATION

DIVIDEND YIELD
The company has a consistent track record of paying
dividend.
The board of directors recommended a total
dividend including an interim dividend of ₹185 per
share for FY23. The dividend pay-out ratio in FY23
was 88.55%.

CASE STUDY
VALUATION

KEY LEVELS
PGHH saw a swift recovery after the panic of Covid
sell off, when it created a low of ₹8400. The stock
went onto to make a new high of ₹16449 in Jan
2022.
After which it broadly consolidated for two years. In
the past few months it has seen renewed
momentum, taking the stock to a new lifetime high
of ₹19250.
The zone of ₹12200-₹12900 would act as a strong
base for the stock going forward and can be used by
long term investors for accumulation.

CASE STUDY
 VALUATION EDGE METER

An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating.
Since judgement on equity is subjective because different people will have different expectation from their investments, it
is better to study each aspect and give an individual grading to arrive at the final evaluation of a stock.

CASE STUDY
QUALITY

MANAGEMENT
From 1st July 2022, Mr. L. V. Vaidyanathan took the
position of Managing Director of the company for a
period of 5 years.

Management’s focus is towards increasing

productivity, developing new and innovative
products, thereby catering to the feminine and
healthcare segments. They will remain committed to
their integrated strategies of superiority,
productivity, constructive disruption and agile and
accountable organization. Their strategy starts with
having a focused portfolio of brands.

Going forward, they believe that raw material

inflation is likely to soften, providing flexibility for
brand investments that would aid volume and sales
growth.

CASE STUDY
QUALITY

SHAREHOLDING PATTERN
The promoter group shareholding remained at the
similar level of 70.64% in the company.

FII shareholding increased to 1.57% in the March

quarter (v/s 1.48% in the December quarter) while
DII shareholding decreased to 15.11% in March
quarter (v/s 15.29% in the December quarter).

Non-institution shareholding increased to 12.68%.

Top public shareholding:-

SBI Focused Equity Fund 6.09%
Life Insurance Corporation of India 3.90%
General Insurance Corporation on India 1.50%
ICICI Prudential Bluechip Fund 1.44%

CASE STUDY
QUALITY

SECTOR POTENTIAL
• Indian FMCG sector witnessed steady growth during the first half of the year. However, higher inflation levels due to disruption in
supply chains and cost inflation in key commodities led to successive price increases thereby impacting volumes.
• Feminine hygiene is one of the most under penetrated segments in the consumer space. While product affordability was an issue
earlier, today the product is available at a cheaper price. Developed countries have extremely high levels of penetration in the
feminine hygiene space. However, surge in awareness towards maintaining personal hygiene is one of the major factors
accelerating the growth of the feminine hygiene industry especially in developing countries.
• With higher product affordability, rising distribution, increasing education and income levels among females, rapid urbanization,
rising proportion of working women, higher product awareness through media, breaking of taboos and category development
efforts by various companies, usage is picking up in what is an essential product for a large segment of the population. The
confluence of company initiatives and favourable social factors should drive rapid growth in the category.
• The introduction of sanitary napkin vending machines in public places like schools, shopping malls, cinema halls etc. increases
accessibility and awareness about the products. This will increase usage and acceptance and will help in the shift from tradition
cloth usage to proper hygienic methods.
• Changing demographic trends, rising per capita income, rising awareness for healthy lifestyle, under-penetrated healthcare space
in India, higher share of non-communicable diseases, better healthcare technology coupled with cost competitiveness are some of
the factors which would be aiding the growth of the healthcare industry in India.

CASE STUDY
QUALITY

COMPETITIVE LANDSCAPE
PGHH enjoys a strong market position in the FMCG
industry, having an established brand equity and
continues to hold a strong foothold in the categories.
Their brands offer choices and outcomes in the
feminine hygiene care and healthcare categories. The
company has a strong array of products where
performance drive brand choices and superiority
across product packaging.
Johnson & Johnson (Stayfree and Carefree brands)
has a market share of ~30%. However, PGHH has a
dedicated focus or distribution reach in the feminine
hygiene space. However, another entrant, Japanese
company Unicharm (Sofy brand) gained ~10%
market share.
Worldwide, private labels have had low success in
this category. Due to its advantages over peers,
PGHH could gain much higher share in a rapidly
growing market.
CASE STUDY
QUALITY

FUTURE OUTLOOK
• Strong volume growth in the feminine hygiene segment will be driven by a combination of extremely low category penetration and
growing distribution reach. They expect volume consumption growth within the FMCG category to be in the mid single-digit in the
next 5-7 years.
• The company’s products across categories reach only a fraction of their parent company’s reach. While its reach has expanded
significantly in the last couple of years, there is a considerable growth potential, given the increased product affordability. With low
priced products in both the segments, the company has an opportunity to increase its distribution that would further aid to grow
and gain market share across product categories.
• Unlike most other consumer categories in India, there is no unorganized segment. Users move from traditional products like cloth
directly to the organized segment, dominated by the big players. The company enjoys the highest market share and the most
favourable barriers to entry versus existing and potential competition. Moreover, since consumption is underdeveloped across
major categories, they foresee and opportunity to grow this segment into double-digits.
• There is huge scope for premiumization, as consumers trade up to thinner and ‘all night’ products. Feminine hygiene features
strong brand loyalty in India and worldwide. Consumers usually trade up and rarely trade down. Premiumization of products will
lead margins.

CASE STUDY
 QUALITY EDGE METER

An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating.
Since judgement on equity is subjective because different people will have different expectation from their investments, it
is better to study each aspect and give an individual grading to arrive at the final evaluation of a stock.

CASE STUDY
FINAL EDGE MATRIX

Growth Efficiency Valuation

TOTAL

3 + 4 + 4 + 5 + 2 + 4 = 22

Profitability Solvency Quality

CASE STUDY
 THANK YOU
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CASE STUDY
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CASE STUDY