Rs 95/Dividend, 1:2 Bonus: At ROE 87.12%, Healthcare Stock Is Long-Term Pick, Target Price Rs 17,000

Brokerage Motilal Oswal is the latest to recommend on midcap stock Procter & Gamble Hygiene & Health Care (PGHH) ahead of its ex-dividend date for upcoming dividend payout of Rs 95 per share. Motilal Oswal believes potential for robust growth, market share, and margin gains make PGHH an attractive pick for long-term. PGHH share price is currently below Rs 16,545 levels, and apart from dividend, the company has delivered bonus shares once in its history.

Motilal attended the analyst meet of PGHH, and during that time management highlighted: (a) potential for double-digit sales growth, particularly in the feminine hygiene segment, in which per-capita spending is currently only one-sixth of that in China; (b) the possibility of accelerating revenue growth following a 1.5x increase in distribution reach compared to three years ago; (c) growing momentum in new portfolio innovations such as Whisper Ultra hygiene products and Vicks Roll-On for headaches; and (d) cost savings to continue (savings of INR1.13b in FY24, ~3% of sales).

That being said, Motilal Oswal said, there is no change in our estimates after the analyst meet.

However, Motilal added, two factors make PG an attractive long-term core holding: 1) robust growth potential in the feminine hygiene segment (65-68% mix of FY24 sales) and the potential for market share gains, aided by strategic initiatives, including the fortification of significant market advantages, and 2) potential for higher margin gains from the long-term trend of premiumization in the feminine hygiene segment.

On the valuation, Motilal Oswal said, "With a portfolio of essentials and healthcare, PGHH focuses on product innovation-led customer acquisition. Penetration play would continue, but at a stable pace, despite the high scope of user additions. The stock trades at expensive valuations of 62x/54x FY25E/FY26E P/E. We do not see any medium-term trigger. Reiterate Neutral with a TP of INR17,000 (55x Jun'26E EPS)."

Meanwhile, as per the Trendlyne data, the consensus recommendation from 2 analysts for Procter & Gamble Hygiene & Healthcare Ltd. is BUY. The 1-year average target price on PGHH is of Rs 17,149.50 ahead.

After the market hours of September 20, PGHH's share price ended at Rs 16544.60 apiece with a market cap of Rs 53,704.99 crore. The reason why PGHH is an expensive stock is because it has never carried a stock split. While the company did deliver bonus issues in the ratio of 1:2 in December 2003.

But PGHH holds a strong track record of delivering hefty dividends. Since May 2000, the company distributed about 32 dividends. In the last 12 months, the company has paid up to Rs 265 in dividends. Currently, it has a dividend yield of 1.60%.

Going ahead, PGHH is going to deliver a final dividend of Rs 95 per share for the Financial Year ending June 30, 2024. The dividend shall be paid between November 19, 2024, to December 15, 2024, on approval of the Members at the 60th Annual General Meeting.

In the June 2024 quarter, despite a continually challenging operating and competitive environment, the Company reported sales of ₹4192 crore, up 7% versus a year ago owing to innovation, premiumization and driving category growth in the feminine hygiene category. For the fiscal, Profit After Tax (PAT) was ₹675 crores, flat versus a year ago driven by the significant impact of one-time tax-related items both in the base period and current period. Operational profit, excluding these one-time impacts, was ₹809 crore, up 19% versus a year ago.

Procter & Gamble Hygiene and Health Care Ltd. (the Company) is one of India's leading FMCG companies that has in its portfolio Whisper - India's leading Feminine Hygiene brand, and VICKS - India's No. 1 Health Care brand and Old Spice. The company has carved a reputation for delivering high-quality, value-added products to meet the needs of consumers. The Company is committed to making every day better in the lives of Indian consumers through superior value propositions. The Company's brands take pride in being socially conscious via their participation in P&G Shiksha, P&G India's flagship CSR program that supports the education of underprivileged children in India.