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Motilal Oswal Report
Procter and Gamble Hygiene and Healthcare Ltd. recorded stagnant growth in Q2 FY24 (ending in June), falling short of our high single-digit growth expectations. However, profit after tax increased 10% YoY propelled by a soft raw material basket and a favorable product price mix.
P&G's gross margin expanded 300 basis points YoY to 60%. Despite flat revenue growth, ad spending rose 14% YoY (11.2% of sales versus 9.7% YoY). Gross margin limited the Ebitda margin expansion to 180 bp YoY at 27% (best margin during the last eight-nine quarters).
With a portfolio of essentials and healthcare, the company remained focused on product innovation-led customer acquisition. Penetration play will continue, but at a steady pace, despite the high scope of user addition.
The stock trades at rich valuations of 63 times and 55 times price/earning of FY25E and FY26E. We do not see any medium-term trigger.
Reiterate 'Neutral'.
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