Last weekend, Procter and Gamble Co.’s (P&G) listed units in India reported their full-year results (their fiscal year ends in June), showing divergent performances on the profitability front. That may also explain why their shares behaved differently, too. Gillette India Ltd’s share has gained 79.2% in the past year, much higher than the 14.6% gain for Procter and Gamble Hygiene and Health Care Ltd. But even Procter and Gamble Hygiene managed to comfortably outrank the sector’s 4.1% growth.

In FY16, Gillette’s sales rose 12.9% to 1,971 crore, with its grooming business (shaving razors and other products) growing 12.6% and its oral care business by a similar rate of 12.7%. These segments contribute to 95% of sales. The battery business revenue grew at a higher rate of 15.9% but this is a small segment and P&G has decided to exit it.

Gillette’s sales growth is despite a slowdown in discretionary consumer demand. New products and income earned from selling cartridge refills give it an edge. That, and benign raw material costs, have contributed to the 27% increase in the grooming segment’s profit. The oral care business continues to be in the investment stage and is making losses, but at a lower level than FY15.

P&G Hygiene is on par on the sales front, actually slightly ahead as sales grew 13.9% to 2,332 crore. But its raw material costs increased 13.3%, still lower than sales growth, but higher than Gillette’s 4%. P&G Hygiene’s main segments are sanitary napkins and the Vicks range of cold and cough products, with the Old Spice range being a more recent addition.

Operating profit grew 15%, and operating profit margin, too, rose 24 basis points to 20.8%. But it paled in comparison with Gillette’s 130% profit growth, mainly due to higher margins in grooming and a decrease in losses in the oral care business. One basis point is one-hundredth of a percentage point.

Better profitability is Gillette’s main edge, especially coming during a difficult time for the industry. But losing the Duracell business will affect revenue and profit growth in FY16. It is getting 64 crore as compensation but is losing a business that earned 99 crore in sales and 16.9 crore in profit in FY15. The compensation seems inadequate.

Between both firms, the grooming business has less competition at the higher end of the market, but the others—oral care, sanitary napkins and products to treat colds and coughs—have enough competition. Therefore, Gillette does have an edge. If urban markets see better days this fiscal, it should benefit, especially as costs are down and it enjoys pricing power.

On the markets, their valuations appear mind-numbing, especially Gillette which trades at 100 times FY15 earnings per share, while P&G Hygiene trades at 56 times.

For Gillette, that means investors expect its oral care business to keep lowering losses, so that profitability improves in FY16, too, while P&G Hygiene has to strain to keep those margins and sales growth in line. It’s a lot to ask.

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