P&G Hygiene and Health Care (PGHHCL) was incorporated in 1964. P&G India launched in India with sanitary napkins under the brand Whisper which brought a sudden change in Indian female hygiene category. Company is currently involved in manufacturing, marketing and distribution of hygiene and health care products. It is one of India’s fastest growing Fast Moving Consumer Goods (FMCG) companies which have great successful brands like Vicks & Whisper.
* P&G currently announced the opening of a new Innovation Center in Beijing also known as Beijing Innovation Center (BJIC). The company can expect to have reinvested a lot of the earnings to grow in future. ...view middle of the document...
Interest coverage ratio has increased from 7552.44 to 420503.78 over the past year which means company has paid off all its interest on short term debt this year lowering risk involved with the company.
* Inventory turnover ratio for the company has increased over the years which mean inventory for the company has reduced and conversion into sales has become fast. Inventory days also have reduced indicating operational efficiency.
* EPS for the company has increased from 38.1 to 55.2 over the past 5 years. Though EPS is not a good indicator, the other indicators reflect the increase in EPS.
Stock Price Analysis (Exhibit )
* The current market price of P&G India is Rs.2210, the stock is trading at 42.32 P/E for FY11E.
* Price/BV of company is gives a price of 1930.6 while the P/E gives a fair value of 1497.37 which is far less than the current market price. Price/BV is to be 10.24x for FY11E
* FV(Firm Value)/EBITDA and EV(Enterprise Value)/EBITDA for the company for 2011 give the stock price fair value as 1631.98 and 1473.35 respectively which is again below its current market price.
* EV (Enterprise Value)/Revenue projects the fair price of P&G as 983.03 for 2011.
* PGHHCL has recommended a share of 22.5 per equity share of Rs 10.
* The current price being above the price band fair value, we recommend to “SELL” the stock currently till it reaches a fair value within the price band.
Annexure – P&G India (PGHHCL)
Year | 2006 | 2007 | 2008 | 2009 | 2010 |
Debt Equity Ratio | -- | -- | -- | -- | -- |
Operating Profit Margin(%) | 19.62 | 22.8 | 25.76 | 27.75 | 27.75 |
Net Profit Margin(%) | 17.77 | 23.81 | 16.21 | 19.89 | 22.36 |
Return on Assets Including Revaluations | 25.08 | 31.13 | 89.7 | 106.79 | 135.56 |
Current Ratio | 1.5 | 2.01 | 1.95 | 1.94 | 2.3 |
Interest Cover | 2,617.08 | 1,264.87 | 16,371.82 | 7,552.44 | 420,503.78 |
Inventory Turnover Ratio | 12.77 | 20.69 | 17.67 | 16.88 | 17.79 |
Asset Turnover Ratio | 3.82 | 4.45 | 3.29 | 3.17 | 3.48 |
Earning Retention Ratio | -61.04 | -6.21 | 24.79 | 43.36 | 50.97 |
Earnings Per Share | 38.39 | 42.98 | 27.67 | 40.48 | 55.1 |
Forward Trading Multiples |
Market Cap | 7,173.66 |
Net Debt | - |
Enterprise value (EV) | 7,173.66 |
EV/ 2011E Revenue | 7.91 |
EV/ 2012E Revenue | 7.07 |
EV/ 2011E EBITDA | 30.32 |
EV/ 2012E EBITDA | 26.70 |
2011 P/E | 42.32 |
2012 P/E | 38.85 |
DCF Multiples |
Firm Value | 11,751.00 |