Citi: P&G Is Misunderstood

Citi equity researchers believe that investors have been too skeptical about P&G's emerging markets opportunity.
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NEW YORK (TheStreet) -- Citi (C) - Get Report equity researchers believe that investors have been too skeptical about P&G's (PG) - Get Report emerging markets opportunity. In Citi's view: the whole thing is one big misunderstanding.

For instance, "maybe PG was late to enter some countries, but PG entered China, Russia and Turkey ahead of

Avon

(AVP) - Get Report

and

Colgate

(CL) - Get Report

," Citi analyst Wendy Nicholson wrote in a client note.

And while Procter & Gamble only generates 33% of its sales from the emerging markets, that still equals nearly $25 billion in sales -- a whopping figure -- the Citi researchers noted.

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Citi says it believes that the notion that profit margins in emerging markets will remain depressed for a long time is a bit extreme. And while some markets, like India, where investment costs remain high, will likely have low EBIT (earnings before interest and tax) margins for some time, others, like China, are very profitable, they said.

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"PG understands that different markets have different growth rates and different demographics," Nicholson noted. "PG has made tough choices about where to invest and where to play in various emerging markets."

The company has historically been less developed in emerging-markets than peers such as Colgate-Palmolive, Avon and

Unilever

(UN) - Get Report

, but the company's management says it's making growth in the emerging markets a top priority.

"PG is going head-to head with big competitors in big categories in big geographies," Nicholson wrote.

-- Reported by Andrea Tse in New York

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