Recommendation From Personal Care Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year. 

Gillette India : A ‘clean’ Path To Progress

HERE IS WHY
✓Strong brand recall
✓Extraordinary returns on capital employed
✓Robust financial position

Gillette India is in the business of manufacturing and selling branded packaged fast moving consumer goods in the grooming and oral care business. It mainly operates two of the leading global brands: Gillette and Oral-B. Its primary product portfolio includes razors and blades, shaving gel, shaving cream and after-shave. Some of its famous brand names include MACH 3, Skin Guard Sensitive, Guard 3 and Fusion 5, among others. The company’s products are sold through retail operations including mass merchandisers, grocery stores, membership club stores, drug stores, etc. Proctor & Gamble Company USA is its ultimate parent company and holds about 75 per cent through its subsidiaries.

The company maintains reporting period ending June 2021. It reported net sales of Rs 2,009 crore in FY21 compared to Rs 1,679 crore in FY20. That is a growth of nearly 19.65 per cent. This strong performance was attributable to the high growth in its core product portfolio. The EBIDTA stood at Rs 492 crore in FY21 as against Rs 370.5 crore in the previous year. That is a growth of over 32.8 per cent. Also, the PAT stood at Rs 310 crore while it stood at Rs 230 crore in FY20. The PAT witnessed a growth of 34.7 per cent. A strong cash balance was witnessed with a growth of nearly 44.7 per cent as can be seen in the cash flows from operating activities increasing from Rs 306 crore in FY20 to Rs 443 crore in FY21.

Net sales for the quarter ended September 2021 stood at almost Rs 573 crore. That’s a growth of 31.5 per cent on QoQ basis and a growth of 11 per cent on YoY basis which was backed by strong product portfolio and improved retail execution. The EBITDA (exclusive of other income) was Rs 125 crore which saw a growth of 139 per cent QoQ but a decline of 5.6 per cent YoY. The EBITDA margin improved significantly over the previous quarter which expanded by about 950 bps to 22.36 per cent. The net profit number stood at Rs 82 crore, again a growth of 197.6 per cent QoQ but de-growth of 14 per cent YoY. The PAT margin too expanded by 800 bps sequentially to reach 14.29 per cent.

Gillette India has maintained an excellent track record of its ROE and ROCE. In FY21, the ROE stood high at 36.8 per cent and the ROCE was even higher at 51.13 per cent. The stock is trading around the price-to-earnings multiple of 62. The company has debt-to-equity ratio of zero. The company launched King C Gillette, a premium range of unparalleled grooming products backed by 100+ years of research and development, marking its entry into the beard care segment. Gillette Guard, its pioneering entry level system, registered its strongest year-onyear value, volume and share growth behind a product restage with Guard Platinum, strong awareness, activation and go-to-market plans.

In the brand’s female grooming portfolio, Gillette Venus too witnessed its strongest year-on-year value, volume and share growth. Its oral care segment found good traction in fiscal 2021. It has a dominant presence in the oral care segment with its Oral-B toothbrush brand which also witnessed strong growth in FY21. It achieved strong sales on the back of new launches such as the superior criss-cross range of toothbrushes and expanding its natural portfolio. Based on our due diligence and judgement, we recommend our reader-investors to BUY the scrip.