Neutral on P&G Hygiene, target price Rs 16,500: Motilal Oswal Financial Services

Motilal Oswal Financial Services has a neutral call on Procter & Gamble Hygiene & Healthcare with a target price of Rs 16,500. The current market price of the stock is Rs 16375.5. P&G Hygiene, incorporated in 1964, is a Large Cap company with a market cap of Rs 52774.99 crore, operating in FMCG sector.

Procter & Gamble Hygiene & Healthcare's key products/revenue segments include Hygiene Products, Creams & Ointments, Cough Drops, Tablets for the year ending 30-Jun-2023.

Financials

For the quarter ended 30-09-2024, the company has reported a Standalone Total Income of Rs 1143.66 crore, up 21.79% from last quarter Total Income of Rs 939.06 crore and down -.91 % from last year same quarter Total Income of Rs 1154.12 crore. The company has reported net profit after tax of Rs 211.90 crore in latest quarter.

Investment Rationale
Motilal Oswal Financial Services has cut P&G Hygiene & Healthcare's EPS estimates by 2%/3% for FY25/FY26. Two factors make PGHH an attractive long-term core holding: 1) robust growth potential in the feminine hygiene segment (65-68% mix of FY24 sales), coupled with the potential for market share gains, aided by strategic initiatives, including the fortification of significant market advantages; and 2) potential for higher margin gains from the long-term trend of premiumization in the feminine hygiene segment.

With a portfolio of essentials and healthcare, P&G Hygiene remains focused on product innovation-led customer acquisition. Penetration play will continue but at a stable pace, despite the high scope of user additions. The stock trades at expensive valuations of 63x/56x FY25E/ FY26E P/E. Further, the brokerage does not see any medium-term trigger. They have reiterated a Neutral rating with a target price of Rs 16,500, based on 55xSep-26E EPS.

Promoter/FII Holdings
Promoters held 70.64 per cent stake in the company as of 30-Sep-2024, while FIIs owned 1.48 per cent, DIIs 15.27 per cent.