PROCTER AND GAMBLE

November 10, 2009

By: Ron Sivick

Current price: $61.94 52 week range: $43.93 - 66.82 Market cap: 180B Large Core, Classic Growth Sector: Consumer Goods Industry: Personal Products Rating: Beta: 0.55

Company Overview

Founded in 1837 Headquarters: Cincinnati, Ohio engages in the manufacture and sale of

consumer goods worldwide Offers products to mass merchandisers,

grocery stores, drug stores, and membership club stores

Operates in three global business units Beauty Health and Well-Being Household Care

Company Overview Cont’d

Largest consumer product manufacturer Offers multiple products in a category and often

more than one brand, in order to reach the most possible shoppers

Continually improving products to increase brand loyalty

Has 23 brands which generate more than $1 billion in sales annually and another 20 brands that generate more than $500 million in sale

Focuses marketing and product development on its beauty-care and health-care segments as well as on developing markets

Overview cont’d

Continuing to expand to countries where they have no presence

Has doubled the sales it derives from developing markets, acquired and integrated Wella and Gillette, and divested a number of lower-margin brands

Beat EPS estimates for fourth quarter and year

Categories of Products

Air Fresheners Antiperspirants &

Deodorants Baby and Child Care Hair Care Hair Color Health Care Pet Nutrition Prescription Drugs Prestige Fragrances Batteries Household Cleaners

Shaving Skin Care Small Appliances Snacks Paper Products Oral Care Laundry & Fabric Care Cosmetics Dish Washing Feminine Care Body Wash & Soap

Global Presence

Argentina Egypt Japan Poland

Australia Finland Lebanon Portugal

Austria France Mexico Spain

Belgium Germany Morocco Sweden

Brazil Great Britain Netherlands Switzerland

Canada Greece Norway Turkey

China India Panama USA

Colombia Ireland Peru Venezuela

Czech Republic Italy Philippines

Net Sales Change

Net Sales Change Drivers vs. Year Ago (2009 vs. 2008)

Volume with Acquisitions & Divestitures

Volume Excluding

Acquisitions &

Divestitures

Foreign Exchange Price

Mix/ Other

Net Sales Growth

BEAUTY Beauty -2% -1% -4% 2% 0% -4%Grooming -6% -5% -6% 5% -2% -9%

HEALTH AND WELL-BEINGHealth Care -4% -3% -5% 4% -2% -7%Snacks and Pet Care -6% -6% -4% 9% -2% -3%

HOUSEHOLD CAREFabric Care and Home Care -3% -3% -5% 6% 0% -2%Baby Care and Family Care 1% 2% -4% 5% -1% 1%

TOTAL COMPANY -3% -2% -4% 5% -1% -3%

Net Income 2000-2009

Year Net Income (Millions)2000 $3,542 2001 $2,922 2002 $4,352 2003 $5,186 2004 $6,481 2005 $7,257 2006 $8,684 2007 $10,340 2008 $12,075 2009 $13,436

TTM $13,395

Sales by Business Segments

46%

33%

21%

Sales

Household Care

Beauty

Health and Well Being

Cross Sectional Analysis

Valuation P & G Johnson & Johnson Kimberly-Clark

P/E 14.23 13.17 14.6P/B

2.7 3.57 4.79P/S

2.27 2.73 1.41P/CF

12 11.1 8.8

Dividend Yield 2.90% 3.30% 3.80%Forward P/E

15.11 12.23 12.28Wall St. Rec.

2.2 2.2 2.5

Sell (5) Hold (3) Buy (1)

SWOT Analysis

Strengths Strong focus on Research and

development Leading market position Diversified product portfolio Strong brand portfolio

SWOT Analysis

Weaknesses Increasing instances of product Dependent on Wal-Mart Stores for

majority of its revenue

SWOT Analysis

Opportunities Expansion in developing markets Future growth plans Growing Indian FMCG market

SWOT Analysis

Threats Regulatory Environment Global Economic Conditions Counterfeit goods

Valuation

Morningstar Fair Value $77.00 Consider buying $61.60My Estimate $80.36

Recommendation

Investment rationale Focus on disciplined cash and cost

management along with investing in capacity, innovation and consumer value to sustain market share during the recession

Continuing to utilize their billion-dollar brands in growing markets

Have turned their focus to the business segments that will derive the most profit growth

Extended the availability and affordability of P&G brands to more low-income consumers

Recommendation Have chosen to focus on five core strengths that are

required to win in the consumer products industry: Consumer understanding

Interact with more than five million consumers each year in nearly 60 countries

Brand-building Built the strongest portfolio of brands in the industry with

23 billion- dollar brands and 20 half-billion-dollar brands Innovation

Leader in the industry Go-to-market capability Scale

Knowledge sharing, common systems and processes, and best practices as it is by size and scope