Tuesday, August 23, 2011

Procter & Gamble Hygiene & Healthcare: A ‘Period’ of huge growth ahead

Procter & Gamble Hygiene & Healthcare (PGHH) is a 2 brand company: Vicks & Whisper. These in turn have brand extensions.

We will concentrate on Whisper.( Feminine Hygiene i.e.Sanitary Pads)

Feminine hygiene is hygiene absorbent products engineered to absorb and retain body fluid without causing any leakage. The user should always feel dry and comfortable. It consists of an absorbent pad sandwiched between two sheets of nonwoven fabric. 

The menstrual cycle starts for young women between the ages 11 - 17, frequently around 12-1 3 years. On average a woman experiences a period every 28th day, 12 - 13 times in a year. A menstrual period normally lasts 3 - 7 days. The loss of fluid in a period is on average half a cup or 65 - 80 ml. The menstrual pattern is influenced by giving birth and contraceptive methods. Menstruation lasts until menopause at the age 45 - 55. The feminine hygiene products market has evolved over more than 100 years to a more than US$ 20 bn.

PGHH has 2 plants and Baddi ( HP ) and 1 in Goa.

Promoters ( P&G, USA through its assocaites and subsidiaries) holds 70.64% of the paid up equity capital

PGHH Feminine Hygiene sales for the last 7 years:

2003-04: Rs.142 cr
2004-05: Rs.163.58 cr
2005-06: Rs.226.8 cr
2006-07 : Rs.282 cr
2007-08: Rs.339.79 cr
2008-09: Rs.428.28 cr
2009-10: Rs.532 cr
2010-11 : Rs.640 cr ( expected)
As can be seen from the above, sales have grown by about 4.5 times over a 8 year period. 

Market size for Feminine Hygiene products:
As per Census 2010,
Total women in India: approx 58.5 cr
Of these, women in urban India : approx 16.25 cr
Women in menstruating age in India : approx 30 cr
Of these, women in urban India : approx 8 cr
At present, the sanitary napkins market in India is estimated to be worth around Rs 1,300 crore. PGHH market share is approx 50%.
Equity : Rs.32.46 cr
Debt: Nil
Current Market price: Rs.1950
Market Cap: Rs.6330 cr
Cash in hand (including loans to group companies) : Rs.432 cr ( as of June 30, 2010) i.e. Rs.132 per share

Some of the key negatives:
1)      Excise duty on sanitary pads was increased last year
2)   Sanitary pads as a category has seen increasing competitive pressure with entry of new players like Japanese Unicham ( brand ‘Sofy’), Mankind Pharma ( Don’t Worry) besides existing players like J&J ( Stayfree), Kimberly Clarke( Kotex), Kaul High ( She) Gufic (Shapers- this is a marginal player) leading to price corrections.

Programs to reach to consumers:
1)      Point of market entry :  about 24 lakh menstruating girls across private and public schools all over India. Over the last 5 years, through this program, PGHH has touched more than 70 lakh girls. In the urban schools, the top tier brand ‘Whisper’ was sampled while in the upcountry schools, the economical mid tier ‘Choice’ was sampled.

2)      Direct to Home program: This house to house program especially in the lower class towns is aimed at educating women about the benefits of using sanitary napkins (Choice) and breaking the affordability barrier. Over the last 5 years, through this program, PGHH has touched close to 20 lakh women

3)      Partnership with National Rural Health Mission: Done initially in Rajasthan to provide education and sanitary protection to rural women (cloth users) to help them lead a healthier , hygienic and more productive life.

The various initiatives being done by PGHH to open the future opportunities ‘pipeline’ have led to disproportionately high promotion expenses over the last 5 years. Though the benefits from these have been visible in terms of increased category sales, these are but a small precursor to the unfolding of the real explosion of demand which shall happen over the next 4 years.I hold the belief that PGHH , unless there are any major unexpected obstacles, has the potential to be valued at  a market cap of  Rs.20,000 cr over the next 4 to 5 years and presents an opportunity which may appear expensive at current price to earnings but offers an investment in what shall pan out to be one of the most lucrative product opportunities in the foreseeable future.

At the time of writing this report, the author /his family have an investment interest in the stock mentioned above. Under no circumstance does the information in this report represent a recommendation to buy or sell the above-mentioned stock.  This report has been prepared and issued on the basis of publicly available information, internally developed data & other sources believed to be reliable. This is just a suggestion solely for information purposes and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Readers using the information contained herein are solely responsible for their actions and are advised to satisfy themselves before making any investments. 

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