Analyst Note
| Philip Gorham, CFA, FRM |Reckitt Benckiser wrapped up a good performance in 2020 with a strong fourth quarter. We expected sales in the hygiene segment to be strong as consumers have been hygiene-conscious through the pandemic, but the 26% underlying divisional growth was a surprise. It seems likely that elevated demand for the hygiene portfolio will be sustained well into 2021. Under these circumstances, we think the 25% pullback in the stock from the peak of 2020 is overdone, and there is now double-digit upside to our fair value estimate of GBX 6,800. Even if hygiene demand eventually fades as consumer behaviour normalises, RB is positioned in strong categories across the portfolios, and we expect price/mix in the nutrition and consumer health divisions to drive above-average growth in the medium term.