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Motilal Oswal Report
Procter and Gamble Hygiene and Healthcare Ltd. declared a weak set of numbers in its Q1 FY23 result (June year-end).
P&G reported flattish sales versus our expectation of 11% growth. High consumer price index inflation appears to be severely affecting the conversion from cloth to sanitary napkins, the key driver of its sales growth.
While the company does not share segmental data in its quarterly results, there may also have been a high base of Vicks sales in Q1 FY22 because of the pandemic.
Downtrading to cheaper stock keeping units in the feminine hygiene segment may also be a factor impacting sales adversely.
While gross margin performance was better than expected and improved ~610 bps sequentially, it contracted ~790 bps YoY. This along with extremely high advertising expenses (14.9% of sales in Q1 FY23 versus 11.7% to 12.8% range in the preceding four quarters) led to ~29% YoY decline in Ebitda and profit after tax each during the quarter.
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