P&G Q3 Results Review - Better-Than-Expected Print; But Valuations Expensive: Motilal Oswal

Motilal Oswal Report

Procter and Gamble Hygiene and Healthcare Ltd. delivered healthy sales growth of 13.5% in Q3 FY24 (FY ending June), which was better than our expectation. This growth was led by a combination of product-price mix, premiumization, and strong retail execution. The growth was much better than our expectation (of 6%) and P&G's recent performance (+4% YoY in H1 FY24).

Gross margin expanded 980 bp/600 bp YoY/QoQ to 66%. Ad spending rose 26% YoY (13.4% of sales versus 12.1% YoY). Ebitda margin improved 880 bp YoY to 26%. Ebitda jumped 72% YoY on a favorable base of a 10% decline in Q3 FY23.

With a portfolio of essentials and healthcare, the company remained focused on product innovation-led customer acquisition. Penetration play would continue, but at a steady pace, despite the high scope of user additions.

The stock trades at expensive valuations of 57 times/51 times FY25E/ FY26E price/earning. We reiterate Neutral rating on the stock.

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