Subsiding inflation potentially benefitting the pace of conversion from cloth to sanitary napkins, strategies under the new CEO and advertising intensity are the key things to watch out for that can have a bearing on our forecasts.

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Nirmal Bang Report

After a disappointing Q1 FY25 (June year-end), Procter and Gamble Hygiene and Health Care Ltd. bounced back in its Q2 FY25 results with a beat on all fronts. Sales grew by ~10% YoY to Rs 12.5 billion (estimate: Rs 12 billion), Ebitda was up ~20% YoY as a result of extremely healthy Ebitda margins of 29.7% (highest since Q2 FY18), 25% beat over expectations and PAT grew by 17.3% YoY to Rs 2.7 billion, 21% higher than expectations. Five-year Sales CAGR resumed close to ~8%, after a blip in Q1 FY25.

Lower material costs and lower than expected ad-spends (over the extremely high levels of the preceding two quarters) led to Ebitda margins of 29.7%. While these levels of Ebitda margins may not be sustainable, the worst seems to be over on the profitability front, especially if sales trajectory can improve further.

We had recently upgraded the stock in the recent quarterly preview to Buy after a steep stock price fall from the peak made valuations more reasonable in a structurally attractive investment case. Maintain Buy.

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