Reckitt Benckiser (RB) is a beneficiary of 2 powerful global megatrends; the rapidly growing middle class in developing countries and the increasing demand for OTC healthcare products because of the rapidly ageing population. There has been an increasing secular trend towards self-medication which is being increasingly supported by governments keen on reducing their respective healthcare bills.
RB is a leading global fast moving consumer goods company in consumer health, hygiene and home care categories, with operations in 60 countries and sales in 180 countries. RB holds strong global market share positions behind its 19 Powerbrands, including Mucinex, Durex, Nurofen in Consumer Health and Finish, Dettol and Veet in Hygiene. The global appeal of these labels provide RB with a very high level of revenues visibility most firms can only dream of, as does its broad presence across both developed and emerging economies.
Since its creation in 1999 when Reckitt & Colman merged with Benckiser, RB has followed the same operational strategy consisting of focusing on no.1 or no.2 brands in growth and/or niche categories. Being the undisputed category leader in underpenetrated product categories offers RB superior medium and long term growth prospects and high levels of profitability. This has been supported by its relentless focus on efficiencies and by implementing a strong and differentiated corporate culture.
Insync’s view is that Reckitt Benckiser will continue to generate sustainably high returns on invested capital due to their dominant market positions and a management incentive structure focused on profitable growth, supported by two powerful megatrends providing the business with a long runway of growth. The stock trades on an attractive free cash flow yield of 5.5%.