Gillette India’s (GILL) 2QFY19 operating and net earnings performance was below expectations largely on account of increased marketing investments which were up nearly 68%. Top-line performance led by oral care business was around 2% above expectation. In oral care business, the company continues to demonstrate strong capability and its product innovations such as ‘Cavity Defense Black’ and ‘Neem’ infused toothbrushes have been received extremely well in the market. These innovations along with strong go-to-market execution capability helped the company to deliver a growth of nearly 36% YoY during the quarter. In the grooming segment, while the company’s performance in the entry level (Gillette Guard) and feminine blades (Venus) has been strong so far, it has faced challenges in its premium Mach 3 portfolio. The recent launch of ‘Mach 3 Start’, in our opinion, will help in improving the pace of premiumisation from the entry-level range. Gross margin trend for the company continued to remain encouraging and it was up nearly 40bps at 59.1%, despite somewhat adverse mix in favour of oral care. EBITDA margin, despite more than 600bps of marketing investments, stood at 20.6% for the quarter. We believe the constant thrust on building the portfolio and targeting new consumers will help the market leader gain further share and deliver profitable growth. Also, there is further headroom for improvement in the product mix and GILL’s new product launches indicate clearly that the focus is more on the mid-premium segment. Therefore, we believe there is potential for earnings to recover in the coming quarters. The company’s innovation capability, competitive performance and cost efficiency continue to remain key investment drivers. Therefore, we have retained Buy rating on GILL with our existing target price of Rs7,500 based on September 2020E earnings and target P/E multiple of 60x, indicating an upside of 16% from the CMP.