Meanwhile, normalisation of ad spends coupled with strong gross margin tailwinds would support earnings, which analysts estimate to grow by 14 per cent in FY21. P&G Hygiene had raised its ad spends in the last couple of years, which some analysts say is unlikely to increase further and should prove supportive in terms of increasing top line. What is also encouraging is structural category growth and premiumisation potential of sanitary napkins, which underlines P&G Hygiene’s long-term prospects as the feminine hygiene segment accounts for around 70 per cent of its sales.
On the flip side, while the outlook is better, there is some risk in the form of competition (Stayfree of Johnson & Johnson) and down-trading, ie consumers shifting to lower priced brands.
Second, pricey valuations may cap significant gains in the stock. At 64 times its FY21 estimated earnings, P&G Hygiene is currently trading at 19 per cent premium to its five-year valuation mean, and higher than 40-57 times valuations of other HPC majors.
Thus, investors should await a good entry point.