20 October, 2008

Procter & Gamble Hygiene & Health Care

Current market price: Rs 675.55

Target Price: Rs 1,114 Upside: 64.9%

Brokerage: SBICAP Securities

Procter & Gamble Hygiene & Health Care (P&G) is a leader in the healthcare (over-the-counter cough and cold medicine) and feminine hygiene categories through its Vicks and Whisper brands, respectively.

In the feminine hygiene category, the company occupies 50 per cent market share. This segment is fast growing due to increase in the number of working women, rising urbanisation, higher affordability and increasing literacy leading to hygiene awareness.

Going forward, the company will increase its product base through further brand variants/extensions. All the products manufactured by the company remain relatively immune from the current inflationary situation, perceived to slow down demand for consumer goods.

The brokerage maintains a Buy rating on the stock due to a robust outlook for its products, leadership position, strong balance sheet and healthy return on capital. The stock appears to be a defensive bet and the current decline in market price of the scrip offers a good entry point to the investors. At Rs 678, the scrip trades at 12.4x FY10E EPS of Rs 54.7.