Church & Dwight Co., Inc.
Church & Dwight Co., Inc. (NYSE: CHD) is engaged in developing, manufacturing, and distributing a wide range of consumer household and personal care products and specialty goods for animal and food production, chemicals, and cleaners. CHD markets its consumer products via 14 different power brands. As of January 11, 2022, the company's market capitalization stood at USD 25.10 billion.
- Declaration of Dividend: On October 27, 2021, CHD declared a quarterly dividend of USD 0.2525 per common share, paid on December 01, 2021, to shareholders of record on November 15, 2021.
- Strategic Investment: On December 27, 2021, CHD acquired TheraBreath, a leading alcohol-free mouthwash brand in the US, for the cash consideration of USD 580 million. TheraBreath will be positioned as the CHD 14th power brand and represents a significant addition to the existing oral care portfolio.
- Growth in Revenue: The company reported YoY growth of 5.67% in revenues to USD 1.31 billion in Q3FY21 (ended September 30, 2021) from USD 1.24 billion in Q3FY20, driven by increased demand for its products.
- Improvement in Profitability: CHD reported growth in net income to USD 230.4 million in Q3FY21 vs. USD 216.2 million in Q3FY20.
- Cash and Debt Position: As of September 30, 2021, the company had cash and cash equivalents of USD 180.0 million and total debt of USD 1.79 billion.
- Customer Concentration Risk: In FY20, Walmart was the company's largest customer, accounting for nearly 23% of net sales. Furthermore, the top three customers accounted for 36% of CHD's revenue during the fiscal year. As a result, losing any of these critical customers could harm the company's top-line.
- Competition Risk: CHD competes directly with established competitors like The Proctor & Gamble Company, Colgate-Palmolive Company, Henkel, Reckitt Benckiser Group plc, Johnson & Johnson, and others in the consumer products business. As a result, any unfavorable shift in demand for CHD's products could result in pricing pressure and market share loss, negatively impacting the company's results of operations.
- FY21 Estimates: As of Q3FY21, CHD expects organic sales growth of ~4% and net sales growth of ~5.5% in FY21. It also anticipates Adjusted EPS growth of 6% and generating cash flow from the operation of ~USD 950 million.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation
(Analysis by Kalkine Group)
- % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
CHD Daily Technical Chart (Source: REFINITIV)
CHD's stock price has increased 23.33% in the past three months and is currently trading close to the higher-band of its 52-week range of USD 77.62 to USD 104.39. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 61.86. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 90.48.
Considering the uptick in the stock price, technical indicators, and current valuation, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 101.82, down 0.95%, as of January 11, 2022.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.