Procter and Gamble Hygiene and Health Care shares were found in the year 1946 in India. Focusing its business in the FMCG in feminine care and healthcare. It is a subsidiary of American Multinational Company Procter and Gamble (P&G).
As a promoter, Procter and Gamble hold almost 68.73%. The other promoter is Temple Tree Impulse and Investment Pvt Ltd, which holds 1.91% of Shares.
One of the best shares in the FMCG buckets and most products is a unique approach. They don’t insert themself into any occupied space, rather they create new market share.
Recently, the company has posted a net profit of Rs. 69.21 Cr in Q4’2020 with a growth of 14% compared to Q4’2019. The share price was at Rs. 1000 in 2010 and currently have grown 10 times. This is one of the best growth on share price, but what is most needed for an investor. It’s their earnings and valuation journey.
Come let have a Vicks to smoothen our research.
Kindly Look at the following review,
BUSINESS OVERVIEW – PROCTER AND GAMBLE SHARES:
The company is only focusing on Fast Moving consumer goods. Especially on unique platforms like a diaper, sanitary napkins, where they are the brand leaders.
The products come under the following care sections,
- Personal Health Care.
- Fabric Care.
- Feminine Care.
- Hair Care.
- Home care.
- Oral Care.
- Skin and Personal Care.
PERSONAL HEALTH CARE:
Their brand VICKS, which was bought from a small startup company is now available in every home in Indian. They have few products in the brand of Vicks,
- Vicks Action 500.
- Vicks Candy
Pamper, the child diaper products come in two varieties, Pant, and Nappies. Another product under this brand is Baby wipes.
Pamper has introduced two products for newborn premium pants for 0-3 months.
You can’t find any house without a detergent powder or liquid. The company has strong brands in the fabric segment.
Both these brands have a strong market share in the detergent industry. Since more washing machines have landed over the years, they have upgraded to liquid-based detergents.
The first-ever feminine sanitary napkins were introduced in India by P&G in the brand name of Whisper. This product has changed the world of female’s comfort.
It comes with more variety of customer’s needs and satisfaction. Whisper is the dominating brand compared to its peer.
Gilette, the biggest brand in the Men grooming industry. They have a variety of products starting from,
- Shaving Razors
- Body Razors
- Replacement Blade
- Shaving Cream
- Shaving Foam and Gel
- After Shave Splash
Head and Shoulder, the world’s leading anti-dandruff shampoo the brand under hair care. Also, H&S has a scalp care product.
Joining the hands together to dominate the hair care industry, they have two other brands,
Oral-B the biggest brand in oral care. They have been the premium option of brushes that support oral advised by dentists.
The market share is dominated by Oral-B in a toothbrush.
In terms of products, well established and market leaders are into the portfolios. The only concern is, no update on pipeline or new product launches. As competitors increases, the market share might slow down. This should be in an investor’s mind before investing in this company.
FINANCIAL ANALYSIS – PROCTER & GAMBLE SHARES:
The above image will give a phenomenal picture of the financial growth as per their FMCG buckets.
- 5 years of revenue growth is higher than the industry average of a CAGR of 3.6%. The P&G 5 years growth is 4.81%
- The company has shown a 5 years Net Income growth of 4.58%. This is lower than the industry average of a CAGR of 7.01%.
- In the last 5 years, the company has grown its market share from 7.11% to 7.53%. This is one of the great news for investors.
Financially, the company doesn’t have a perfect growth factor. One year it grows the next year it shrinks. The major reason, they don’t have any pipeline or new products to launch.
They just keep upon upgrading the products which they are having in hand. Except for Vicks, all the other sectoral products have a huge competition in the market.
FUNDAMENTAL ANALYSIS – PROCTER & GAMBLE SHARES:
Number of Shares – 3.246 Cr Shares
Market Capitalization – Rs. 32,826.19 Cr
This is the foremost important in fundamental analysis is ratios.
Book value – Rs. 280.05
Price to Book Value (P/B) – 36.11 (Too High and it’s dangerous)
Earnings per Share (TTM) – Rs. 133.41 per share
Price to Earnings (P/E) – 75.8 (Very Expensive)
5 Years EPS Growth – 6.77%
Dividend Yield – 0.87%
Debt to Equity Ratio – 0.0
Current Ratio – 1.66 (Minimum Threshold should be 2)
Interest Coverage ratio – 111.83
Return on Equity (ROE) – 46.11%
Net Profit Margin – 13.96%
Free Cash Flow – Rs. 410.19 Cr
Enterprise Value/EBITDA – 50.97 (Very Very Expensive) – New Investors should avoid investing.
SHAREHOLDING PATTERN – PROCTER AND GAMBLE SHARES:
- Promoters – 2,29,29,773 Shares (70.64%)
- Retail Investors – 38,04,348 Shares (11.72%)
- Mutual Funds – 15,66,126 Shares (4.82%)
- Financial Institutions – 12,06,771 Shares (3.72%)
- Insurance Companies – 8,23,083 Shares (2.54%)
- Foreign Investors – 10,97,894 Shares (3.38%)
- Private Corporates – 8,34,131 Shares (2.57%)
- Others – 1,98,610 Shares (0.61%)
EXCESS LIQUID CASH PER SHARE:
Total Liquid Asset
- Fixed Asset
- Other Financial Assets: Rs 0.4 Cr
- Current Asset
- Cash and Cash Equivalents: Rs. 525.90 Cr
- Bank Balance: Rs. 14.55 Cr
- Other Financial Assets: Rs. 24.31 cr
Total Liquid Asset: Rs. 565.16 Cr
Total Liabilities: Rs. 722.85 Cr
Excess Liquid Cash: Rs (157.69) Cr (negative)
Excess Liquid Cash per share: Rs. (48.58) per Share
INTRINSIC VALUE – PROCTER AND GAMBLE SHARES:
EPS (TTM) – 133.91
5 years EPS Growth is 6.77%
5 Years of Revenue Growth is 7.09%
Since it is a well-established company we should not take last year’s growth. Anyhow, the last 1-year growth is very pathetic in growth. Just 3.67%.
So, Maximum we can expect a return of 7% in net profit, and the margin of safety can be just 10% as it is 0.85 times volatile than nifty.
The Intrinsic value will be less than Rs. 1597 per share. The current share price is trading at 5.4 times higher than the intrinsic value.
INSIGHT TO INVESTORS:
- In the recent rally post COVID crash, all the FMCG stocks have grown much ahead of its earnings.
- As an Intelligent Investor, are you going to invest in a share which 75.8 times higher than its earnings? Also think about EV/EBITDA, where we say less than 15 is the perfect stock. PGHH has EV/EBITDA at 50 times higher.
- If you are looking for wealth creation, don’t miss this stock, but miss this stock at the current price.
- It is not necessary to buy more stocks rather, the protection of your capital is more important.
- A fundamentally strong company with zero debt and revenue is coming down in the last 2 quarters. So, you can into your portfolios, when the share price is within your intrinsic value.