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Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
KEY DATA
Rating BUY Sector relative Outperformer Price (INR) 2,408 12 month price target (INR) 2,900 Market cap (INR bn/USD bn) 5,657/76.3 Free float/Foreign ownership (%) 38.1/14.5
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
All round strong show
Hindustan Unilever (HUL) reported Q4FY21 net sales (up 34.6% YoY), EBITDA (up 43.2% YoY) and adjusted PAT (up 35% YoY) marginally ahead of our estimates. On comparable basis, revenue grew 21% YoY. Domestic volumes rose 16% YoY on a base of -7%. All segments clocked a strong double-digit growth with Foods & Refreshment spearheading growth (up 36% excluding GSK). Home Care rebounded
(up 15% YoY) as fabric wash picked up.
Improving portfolio mix combined with HUL’s cost control, price hikes and synergies from GSK takeover should aid EBITDA margin despite inflationary input prices. Retain ‘BUY’ with revised TP of INR2,900 as we roll over to Sept 2022E.
FINANCIALS (INR mn)
Year to March FY20A FY21E FY22E FY23E
Revenue 3,97,830 4,70,280 5,31,121 5,79,710
EBITDA 98,610 1,16,260 1,34,052 1,52,138
Adjusted profit 67,640 80,000 96,965 1,12,723
Diluted EPS (INR) 31.2 34.0 41.3 48.0
EPS growth (%) 11.6 9.0 21.2 16.3
RoAE (%) 86.5 29.5 20.1 22.9
P/E (x) 77.1 70.7 58.3 50.2
EV/EBITDA (x) 56.7 48.0 41.5 36.4
Dividend yield (%) 1.1 1.7 1.5 1.8
PRICE PERFORMANCE
Broad-based growth
What we liked: All three segments posting double-digit growth. YoY as well as QoQ
EBITDA margin expansion despite significant inflation.
What we did not like: BPC segment witnessing QoQ margin compression (down
167bps QoQ) as spike in palm oil prices continues to drag soap’s profitability.
Key highlights: The home care segment grew 15% YoY enabled by a strong recovery
in fabric wash. BPC grew 20% with skin cleansing, hair care and oral care clocking
strong double-digit growth. Foods & Refreshment sustained high growth
momentum--up 36%. The company launched INR2 sachets in Boost and Horlicks to
drive penetration. Gross margin was hit 125bps YoY due to spike in inflation in a few
key raw materials (tea, palm oil); however, cost optimisation and operating leverage
led to EBITDA margin expansion of 151bps YoY.
Q4FY21 conference call: Key takeaways
87% of the portfolio gaining penetration with 82% of the business gaining volume
share. HUL is focusing on rapid digitization and now has 0.5mn Shikhar outlets.
Revenue from Shikhar stores 6x in Q4FY21 versus Q4FY20. Elevated presence in
chemist channel after GSK acquisition is helping.
Explore:
Outlook and valuations: On a firm footing; maintain ‘BUY’
We expect HUL to be key beneficiary of strong rural demand. In terms of covid-19
impact, we believe the demand situation is dynamic; however, HUL is well placed in
terms of its supply chain. We retain ‘BUY/SO’ with a revised TP of INR2,900 (earlier
INR2,805) rolling forward to Sept 2022E. The stock is trading at 50.2x FY23E EPS.
Financials Year to March Q4FY21 Q4FY20 % Change Q3FY21 % Change
Net Revenue 1,21,320 90,110 34.6 1,18,620 2.3
EBITDA 29,570 20,650 43.2 28,540 3.6
Adjusted Profit 21,290 15,770 35.0 19,630 8.5
Diluted EPS (INR) 9.1 7.3 24.3 8.4 8.5
Above In line Below
Profit
Margins
Revenue Growth
Overall
30,000
34,600
39,200
43,800
48,400
53,000
1,925
2,040
2,155
2,270
2,385
2,500
Apr-20 Jul-20 Oct-20 Jan-21 Apr-21
HUVR IN Equity Sensex
India Equity Research Consumer Staples April 29, 2021
HINDUSTAN UNILEVER RESULT UPDATE
Abneesh Roy Tushar Sundrani +91 (22) 6620 3141 +91 (22) 6620 3004 [email protected] [email protected]
Corporate access
Financial model Podcast
Video
HINDUSTAN UNILEVER
Edelweiss Securities Limited
2 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Financial Statements
Income Statement (INR mn) Year to March FY20A FY21E FY22E FY23E
Total operating income 3,97,830 4,70,280 5,31,121 5,79,710
Gross profit 2,15,240 2,48,800 2,84,554 3,13,497
Employee costs 18,200 23,580 25,617 26,214
Other expenses 47,130 47,540 59,240 64,078
EBITDA 98,610 1,16,260 1,34,052 1,52,138
Depreciation 10,020 10,740 10,937 11,578
Less: Interest expense 1,180 1,170 1,150 1,150
Add: Other income 6,320 4,100 9,069 11,290
Profit before tax 93,730 1,08,450 1,31,034 1,50,699
Prov for tax 24,090 26,060 34,069 37,976
Less: Other adj 0 0 0 0
Reported profit 69,640 82,390 96,965 1,12,723
Less: Excp.item (net) (2,000) (2,390) 0 0
Adjusted profit 67,640 80,000 96,965 1,12,723
Diluted shares o/s 2,165 2,350 2,350 2,350
Adjusted diluted EPS 31.2 34.0 41.3 48.0
DPS (INR) 26.2 40.5 37.1 43.2
Tax rate (%) 25.7 24.0 26.0 25.2
Important Ratios (%) Year to March FY20A FY21E FY22E FY23E
Other exp (% of rev) 12.9 13.1 12.4 12.3
Con A&P (% of rev) 12.0 10.3 11.3 11.2
Gross margin (%) 54.1 52.9 53.6 54.1
EBITDA margin (%) 24.8 24.7 25.2 26.2
Net profit margin (%) 17.0 17.0 18.3 19.4
Revenue growth (% YoY) 1.4 18.2 13.0 9.2
EBITDA growth (% YoY) 11.0 17.9 15.3 13.5
Adj. profit growth (%) 11.6 18.3 21.2 16.3
Assumptions (%) Year to March FY20A FY21E FY22E FY23E
GDP (YoY %) 4.8 (6.0) 7.0 6.0
Repo rate (%) 4.4 3.5 3.5 4.0
USD/INR (average) 70.7 75.0 73.0 72.0
Volume gr. (overall) 2.0 1.0 7.0 7.0
Pricing gr. (overall) (0.6) 1.0 6.0 2.2
COGS % of sales (con) 45.9 47.1 46.4 45.9
Staff cost (% of rev) 4.7 5.1 4.9 4.6
Yield on cash 9.9 5.7 10.0 10.0
Dep (% of gross block) 14.6 11.8 10.8 10.5
Valuation Metrics Year to March FY20A FY21E FY22E FY23E
Diluted P/E (x) 77.1 70.7 58.3 50.2
Price/BV (x) 63.3 11.9 11.6 11.4
EV/EBITDA (x) 56.7 48.0 41.5 36.4
Dividend yield (%) 1.1 1.7 1.5 1.8
Source: Company and Edelweiss estimates
Balance Sheet (INR mn) Year to March FY20A FY21E FY22E FY23E
Share capital 2,165 2,350 2,350 2,350
Reserves 80,130 4,74,390 4,84,087 4,95,359
Shareholders funds 82,295 4,76,740 4,86,437 4,97,709
Minority interest 170 200 200 200
Borrowings 0 0 0 0
Trade payables 75,350 88,020 94,574 1,07,215
Other liabs & prov 14,980 82,720 82,720 82,720
Total liabilities 1,98,695 6,87,400 7,03,650 7,27,563
Net block 49,600 61,160 60,223 56,644
Intangible assets 5,190 4,53,270 4,53,270 4,53,270
Capital WIP 5,970 7,450 4,500 4,500
Total fixed assets 60,760 5,21,880 5,17,993 5,14,414
Non current inv 20 20 20 20
Cash/cash equivalent 63,665 71,780 90,672 1,12,876
Sundry debtors 11,490 17,580 17,461 19,059
Loans & advances 16,580 14,390 14,390 14,390
Other assets 33,860 40,930 42,294 45,984
Total assets 1,98,695 6,87,400 7,03,650 7,27,563
Free Cash Flow (INR mn) Year to March FY20A FY21E FY22E FY23E
Reported profit 97,230 1,16,720 1,31,034 1,50,699
Add: Depreciation 10,020 11,340 10,937 11,578
Interest (net of tax) 1,180 1,170 1,150 1,150
Others (60) (10) 12,087 12,728
Less: Changes in WC 4,110 (1,010) 5,308 7,354
Operating cash flow 76,230 91,630 1,14,360 1,32,805
Less: Capex (8,620) 22,300 7,050 8,000
Free cash flow 84,850 69,330 1,07,310 1,24,805
Key Ratios Year to March FY20A FY21E FY22E FY23E
RoE (%) 86.5 29.5 20.1 22.9
RoCE (%) 116.9 39.2 27.4 30.8
Inventory days 53 52 54 53
Receivable days 14 11 12 11
Payable days 147 135 135 138
Working cap (% sales) 8.3 7.3 9.0 10.9
Gross debt/equity (x) 0 0 0 0
Net debt/equity (x) (0.8) (0.2) (0.2) (0.2)
Interest coverage (x) 75.1 90.2 107.1 122.2
Valuation Drivers Year to March FY20A FY21E FY22E FY23E
EPS growth (%) 11.6 9.0 21.2 16.3
RoE (%) 86.5 29.5 20.1 22.9
EBITDA growth (%) 11.0 17.9 15.3 13.5
Payout ratio (%) 81.4 115.5 90.0 90.0
Edelweiss Securities Limited
HINDUSTAN UNILEVER
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 3
Segment growth and margins
Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21
Overall volume growth (YoY) (7.0) (8.0) 1.0 4.0 16.0
Overall net sales growth (YoY)* (9.4) 4.4 16.1 20.9 34.6
% sales growth (YoY)
Home care (4.3) (2.1) (1.6) (1.4) 14.6
Beauty and personal care (13.5) (12.0) (0.2) 9.7 19.7
Foods & Refreshments* (6.7) 51.7 82.9 79.9 96.4
Others* (46.3) 55.5 130.8 241.3 222.2
EBIT margins (%)
Home care 19.0 18.8 20.4 18.9 21.1
Beauty and personal care 24.9 28.1 29.3 29.2 27.5
Foods & Refreshments 12.6 19.7 16.5 14.1 16.4
Others 5.6 28.7 26.2 19.5 29.7
Source: Company
*Q1FY21, Q2FY21, Q3FY21 and Q4FY21 includes GSK Consumer’s portfolio, which is not in
the base quarter; hence, growth rates are not comparable.
Portfolio snapshot
Source: Company
Domestic consumer growth and USG excludes the impact of merger of GSK CH and acquisition of VWash
HINDUSTAN UNILEVER
Edelweiss Securities Limited
4 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Home Care : Innovations & Activations in the quarter
Source: Company
Beauty & Personal Care : Innovations & Activations in the quarter
Source: Company
Edelweiss Securities Limited
HINDUSTAN UNILEVER
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 5
Foods & Refreshment : Innovations & Activations in the quarter
Source: Company
Overall volume growth
Source: Company
Q4FY21 conference call | Key takeaways
Overall
87% of the portfolio gaining penetration.
Agile & Resilient Supply Chain - 1.3X capacity Vs pre COVID.
Company is focusing on rapid digitization with 0.5 mn Shikhar outlets. Added
350,000 outlets.
Focus on ecommerce, GT & Rural.
150 SKUs launched in FY21.
Big brands saw 5X Growth rates vs FY20.
Market Development & Premiumisation – These categories grew 2x vs core;
WiMI led opportunities.
-10.0
-4.0
2.0
8.0
14.0
20.0
Q3
FY1
7
Q4
FY1
7
Q1
FY1
8
Q2
FY1
8
Q3
FY1
8
Q4
FY1
8
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
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FY2
0
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FY2
0
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1
Q2
FY2
1
Q3
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1
Q4
FY2
1
(%)
HINDUSTAN UNILEVER
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Domestic consumer growth came in at 21% YoY with 16% YoY uvg.
COVID surge unprecedented; demand outlook difficult to predict. However
company’s agility and responsiveness across the value chain significantly better
than pre COVID.
Health, Hygiene & nutrition about 80% grew in double digits
82% of company’s business is gaining volume share as per kantar panel.
Increased portfolio by introducing Immunity boosting under Horlicks and high
sciences products.
Nutrition business at 31.8% EBITDA margin expanded 370bps, ahead of
expectations.
Company is positioned well to tackle challenges arising out of covid-19.
Company has rejigged employees into different roles as the pandemic has led to
decrease in demand in some categories necessitating fewer employees.
Retailers were able to place orders through Shikhar app when sales person
couldn’t visit.
Revenue from shikhar stores at 6x in Q4FY21 vs Q4FY20.
Ecommerce contribution has doubled.
Company has setup a specific premium beauty team in its beauty and personal
care segment.
Company has digitised factories and is automating warehouses.
Company has increased grammage in INR5 packets of Horlicks. The company is
committed to increasing penetration in HFD category.
Company’s focus is on Consumer centric innovations, market development and
digital transformation ‘Re-imagining HUL’.
Company’s focus in on winning in high growth channels of E-commerce and
General Trade.
Company is focused on delivering volume led competitive growth
INR 5 is for two cups of Horlicks and INR 2 is for one cup. The company will
continue to drive jars but LUP will increase penetration. High sciences is also a
focus area.
Because of micro containment zones, Impact on supply chain is limited
First fortnight of April, demand momentum was strong, second half of April
demand impacted to some extent, however not as bad as last year.
Elevated presence in chemist after GSK acquisition helps.
Strengthened market leadership in Lifebuoy.
Nature protect for its proposition should do well. Benefits of Neem are well
known.
Backend for fulfilment via Shikhar is completely different.
Edelweiss Securities Limited
HINDUSTAN UNILEVER
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Company is fulfilling orders the next day after the order is placed.
In terms of GSK portfolio, company is still grappling with what to do with biscuits
portfolio.
HFD penetration is about 25%. Company’s business in HFD is in east and south
India. Company is expanding geographically.
GSK sales integration still happening.
Customers who use premium products remain somewhat insulated from the
vagaries that normal consumer do. So essentially if the supply is available, the
consumption continues.
Domex has a strong proposition of killing germs and viruses and hence products
around disinfection makes sense.
Rural has grown double digits in Q4FY21. Low to mid-single digits growth in
urban.
Ecommerce contribution is 5-6%. Ecommerce is more profitable than MT and MT
is more profitable than GT.
Home Care
Household Care: Continues to perform well. Strong double-digit growth led by
Vim.
Fabric Wash: Strong sequential growth aided by increased mobility;
Performance competitive. Liquids and premium portfolio growing ahead of the
category
Purifiers: Improving sequentially led by acceleration in E-commerce.
Beauty & Personal Care
Skin Cleansing: Robust performance led by high double-digit growth in Lifebuoy.
Premium Skin Cleansing continues to do well, Lux stable. VWash momentum
accelerates. Inflationary pressures remain elevated; calibrated pricing actions to
continue.
Oral Care: Growth momentum sustained, Closeup continues to deliver strong
results.
Hair Care: High double-digit growth & broad-based across brands. Contextual
communications and focussed innovations drive performance.
Skin Care: Strong performance in winter portfolio led by Vaseline. Face Cleansing
& Talc segments continue to do well. GAL sequential momentum picking up
coupled with penetration gains.
Color Cosmetics: Demand continues to improve sequentially; category well
positioned.
Foods & Refreshment
Foods: Soups and Ketchups grow in high double-digits. With increased mobility
we saw softening of ‘In-home consumption’ trend in the quarter.
Beverages: Tea share gain momentum continues. High double-digit growths
across brands. Stable performance in Coffee.
HINDUSTAN UNILEVER
Edelweiss Securities Limited
8 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Nutrition: Focus on volume led growth continues to yield strong results; volumes
grow in teens, penetration gains continue. Horlicks and Boost INR 2 sachets
launched to unlock penetration. ERP integration completed in current quarter;
Sales systems go live in Q2FY22. Volume growth - High teens. Underlying sales
growth lower than that but still double digit. There was some disruption in terms
of sub distributors, company will be addressing it in the coming quarter.
Ice Cream, Food Solutions & Vending: Strong recovery in Ice cream. Innovation
intensity dialled up with launch of Cornetto Chokissimo, Trixy Cup and premium
Kulfis.
Costs and margins
Company has ambitious Savings Agenda (>8%).
Company has taken 2% Sequential step-up in consumer prices.
Elevated inflationary pressure in select large categories. Company has taken
Judicious pricing actions coupled with cost agility and savings programmes to
counteract this.
In terms of skin cleansing, palm oil is up 40-50% YoY and also up QoQ. 10-13%
price hike required to just cover this cost. By the end of April company has taken
7-8% price hike. Will take more if demand holds up. Company is not shy of leading
pricing action
In Tea, company has taken pricing action in small lots to manage inflation.
In home care, company has reversed some pricing cut as crude continues to be
inflationary.
Other expenditure tends to be 13% of revenue.
Considering the inflation, the focus is to maintain margin in a healthy range.
INR300 mn benefit in tax.
ETR guidance - 25.9-26%
Outlook and valuation: On a firm footing; maintain ‘BUY’
We remain positive on HUL's ability to outgrow the market, as well as its pricing
power underpinned by distribution expansion, deepening direct reach and product
innovation initiatives. Demand shift from the unorganised segment should result in
additional gains for the company. The merger of GSK portfolio with HUL has begun
to yield revenue delta; we believe the larger story will be innovation and NPDs in
HFD and allied categories.
Cost savings and mix improvement are bound to spur margin structurally. Although
in the near term, inflationary raw materials may continue to impact gross margin,
going forward, we expect cost-saving initiatives such as zero-based budgeting,
efficiency in ad spends, changes in route-to-market, etc to help. The acquisition of
GSK’s portfolio will also aid overall margin expansion.
We expect premiumisation to sustain, and hence, expect better earnings growth.
We retain ‘BUY/SO’ with revised TP of INR2,900 as we roll forward to Sept 2022E.
The stock is trading at 50.2x FY23E EPS.
Edelweiss Securities Limited
HINDUSTAN UNILEVER
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 9
One year forward P/E
Source: Edelweiss Research
A&P spends
Source: Company
Sales by category (revenue split Q4FY21)
Source: Company
Sales by category (revenue split Q4FY20)
Source: Company
500
1,000
1,500
2,000
2,500
3,000
Ap
r-1
7
Oct
-17
Ap
r-1
8
Oct
-18
Ap
r-1
9
Oct
-19
Ap
r-2
0
Oct
-20
Ap
r-2
1
(IN
R)
65x
55x60x
40x45x
50x
35x
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Q3
FY1
7
Q4
FY1
7
Q1
FY1
8
Q2
FY1
8
Q3
FY1
8
Q4
FY1
8
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
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1
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1
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1
(%)
Home care32%
Personal care37%
Foods & refreshmen
ts29%
Others2%
Q4FY21 revenue split
Home care37%
Personal care42%
Foods & refreshmen
ts20%
Others1%
Q4FY20 revenue split
HINDUSTAN UNILEVER
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EBIT by category (Q4FY21)
Source: Company
EBIT by category (Q3FY20)
Source: Company
Segmental performance - Consolidated
Year to March - Revenues (INR mn) Q4FY21 Q4FY20 YoY growth Q3FY21 QoQ growth
Home care 38,380 33,500 14.6 34,090 12.6
Beauty and personal care 45,770 38,340 19.4 48,680 (6.0)
Foods & Refreshments* 35,110 17,880 96.4 33,560 4.6
Others (includes exports, infant and feminine care etc)* 5,070 2,390 112.1 5,480 (7.5)
Segment results (Profit/(Loss) before tax and interest)
Home care 8,120 6,360 27.7 6,460 25.7
Beauty and personal care 12,590 9,540 32.0 14,230 (11.5)
Foods & Refreshments* 5,750 2,250 155.6 4,730 21.6
Others (includes exports, infant and feminine care etc)* 1,310 140 835.7 1,350 (3.0)
Segment margins
Margin (%)
Home care 21.2 19.0 217 18.9 221
Personal care 27.5 24.9 262 29.2 (172)
Foods & Refreshments 16.4 12.6 379 14.1 228
Others (includes exports, infant and feminine care etc) 25.8 5.9 1,998 24.6 120
Source: Company
Home care30%
Personal care46%
Foods & refreshmen
ts21%
Others3%
Q4FY21 - EBIT contribution
Home care35%
Personal care52%
Foods & refreshmen
ts13%
Others0%
Q4FY20 - EBIT contribution
Edelweiss Securities Limited
HINDUSTAN UNILEVER
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Segmental performance - standalone
Year to March - Revenues (INR mn) Q4FY21 Q4FY20 YoY growth Q3FY21 QoQ growth
Home care 38,400 33,500 14.6 34,090 12.6
Beauty and personal care 45,490 38,010 19.7 48,410 (6.0)
Foods & Refreshments 35,110 17,880 96.4 33,560 4.6
Others (includes exports, infant and feminine care etc) 2,320 720 222.2 2,560 (9.4)
Segment results (Profit/(Loss) before tax and interest)
Home care 8,120 6,360 27.7 6,460 25.7
Beauty and personal care 12,520 9,450 32.5 14,130 (11.4)
Foods & Refreshments 5,750 2,250 155.6 4,730 21.6
Others (includes exports, infant and feminine care etc) 690 40 1,625.0 500 38.0
Segment margins
Margin (%)
Home care 21.1 19.0 216 18.9 220
Personal care 27.5 24.9 266 29.2 (167)
Foods & Refreshments 16.4 12.6 379 14.1 228
Others (includes exports, infant and feminine care etc) 29.7 5.6 NM 19.5 1,021
Source: Company
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Financial Snapshot (INR mn)
Year to March Q4FY21 Q4FY20 % change Q3FY21 % change FY21 FY22E FY23E
Net sales 1,19,470 88,850 34.5 1,16,820 2.3 4,62,690 5,22,999 5,71,183
Other income-operational 1,850 1,260 46.8 1,800 2.8 7,590 8,121 8,527
Net revenues 1,21,320 90,110 34.6 1,18,620 2.3 4,70,280 5,31,121 5,79,710
Cost of goods sold 57,560 41,700 38.0 54,590 5.4 2,21,480 2,46,567 2,66,213
Gross profit 63,760 48,410 31.7 64,030 (0.4) 2,48,800 2,84,554 3,13,497
Staff cost 5,220 3,550 47.0 5,560 (6.1) 23,580 25,617 26,214
Advertising & promotions 14,130 11,640 21.4 13,880 1.8 47,540 59,240 64,078
Other expenditure 14,840 12,570 18.1 16,050 (7.5) 61,420 65,644 71,068
Total expenditure 34,190 27,760 23.2 35,490 (3.7) 1,32,540 1,50,502 1,61,359
EBITDA 29,570 20,650 43.2 28,540 3.6 1,16,260 1,34,052 1,52,138
Depreciation/Amortisation 2,490 2,550 (2.4) 2,720 (8.5) 10,740 10,937 11,578
EBIT 27,080 18,100 49.6 25,820 4.9 1,05,520 1,23,115 1,40,559
Interest Expense 90 260 (65.4) 410 (78.0) 1,170 1,150 1,150
Other income 1,090 2,660 (59.0) 970 12.4 4,100 9,069 11,290
Profit Before Tax 28,080 20,500 37.0 26,380 6.4 1,08,450 1,31,034 1,50,699
Provision for tax 6,790 4,730 43.6 6,750 0.6 26,060 34,069 37,976
Exceptional Item Net of Tax 140 -580 (124.1) -420 (133.3) -2,390 0 0
Reported profit 21,430 15,190 41.1 19,210 11.6 80,000 96,965 1,12,723
Prior period (Net of tax) 0 0 NM 0 NM 0 0 0
Exceptionals (Net of tax) 140 -580 (124) (420) -133 -2,390 0 0
Adjusted profit 21,290 15,770 35.0 19,630 8.5 82,390 96,965 1,12,723
No. of Diluted shares outstanding
(mn) 2,350 2,164 8.6 2,350 0.0 2,350 2,350 2,350
Adjusted Diluted EPS 9.1 7.3 24.3 8.4 8.5 35.1 41.3 48.0
as % of net sales
Other income-operational 1.5 1.4 13 1.5 1 1.6 1.6 1.5
COGS 48.2 46.9 125 46.7 145 47.9 47.1 46.6
Staff costs 4.4 4.0 37 4.8 (39) 5.1 4.9 4.6
Advertising & promotions 11.8 13.1 (127) 11.9 (5) 10.3 11.3 11.2
Other expenditure 12.4 14.1 (173) 13.7 (132) 13.3 12.6 12.4
EBITDA 24.8 23.2 151 24.4 32 25.1 25.6 26.6
EBIT 22.7 20.4 230 22.1 56 22.8 23.5 24.6
PBT 23.5 23.1 43 22.6 92 23.4 25.1 26.4
Net profit 17.8 17.7 7 16.8 102 17.8 18.5 19.7
Tax rate 24.2 23.1 111 25.6 (141) 24.0 26.0 25.2
Source: Company, Edelweiss Research
Edelweiss Securities Limited
HINDUSTAN UNILEVER
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 13
Company Description
HUL, the largest FMCG player in India, was formed by merging three subsidiaries of
Unilever in 1956. HUL’s portfolio of products covers a wide spectrum including
soaps, detergents, skin creams, shampoos, toothpastes, tea, coffee, packaged foods
and branded atta.
Powerful brands and an envious distribution network are its primary strengths. The
company operates through segments—home care, personal care, foods &
refreshments, and other operations.
Investment Theme
HUL is a play on consumption growth in India. The company has proved its ability to
effect price hikes and ability to grow ahead of market, which, combined with
improved outlook for S&D and personal care, and strong growth in processed foods
and beverages, boosts our positive outlook on the company. HUL has strongly
entered the naturals category and termed it a mega trend. HUL's acquisition of GSK
Consumer's HFD portfolio will also aid in overall revenue momentum. We appreciate
its revenue growth from a medium to long term perspective. Though commodity
prices have started to inch up, we are not worried since HUL has sufficient pricing
power to offset any pressure likely to arise at the gross margin level. We expect
higher investment in A&P to support brand equity and counter pick up in
competitive intensity (especially from regional players). With overall demand
looking buoyant, we expect HUL to be key beneficiary.
Key Risks
INR depreciation impacts price of imported raw materials.
Ad spends likely to spike due to increased competition from regional players.
Maintaining market share will also be a challenge for HUL.
The price war in HUL’s popular segments with new entrants entering the fray
could hit the company had.
HINDUSTAN UNILEVER
Edelweiss Securities Limited
14 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Additional Data
Management
MD and Chairman Mr. Sanjiv Mehta
CFO Mr. Ritesh Tiwari
Exec Director Mr. Dev Bajpai
Exec Director Mr. Willem Uijen
Auditor BSR & Co. LLP
Holdings – Top 10* % Holding % Holding
Nordea Bank 0.28 Icici Prudentia 0.55
Vanguard Group 1.29 Standard Life A 0.42
Blackrock 1.25 Norges Bank 0.41
Sbi Funds Manag 0.90 Uti Asset Manag 0.39
Jp Morgan Chase 0.62 Kotak Mahindra 0.30
*Latest public data
Recent Company Research Date Title Price Reco
22-Mar-21 Concerns overdone; outlook affirmative; Company Update
2,252 Buy
03-Mar-21 Clearing the air: Decent recovery all ov; Company Update
2,163 Buy
27-Jan-21 Decent recovery across portfolio; Result Update
2,400 Buy
Recent Sector Research Date Name of Co./Sector Title
27-Apr-21 Britannia Industries Volumes strong; high costs dent margin ; Result Update
20-Apr-21 Bajaj Consumer Care Dividend normalising; costs inflationary; Result Update
20-Apr-21 Nestle India Scrumptious show; Result Update
Rating Interpretation
Source: Bloomberg, Edelweiss research
Daily Volume
Source: Bloomberg
Rating Distribution: Edelweiss Research Coverage
Buy Hold Reduce Total
Rating Distribution* 166 59 17 242
>50bn >10bn and <50bn <10bn Total
Market Cap (INR) 198 51 4 253
* stocks under review
Rating Rationale
Rating Expected absolute returns over 12 months
Buy: >15%
Hold: >15% and <-5%
Reduce: <-5%
TP1,767
TP2,020
TP2,288
TP2,620
1375
1625
1875
2125
2375
2625
Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Oct-20
(IN
R)
HUVR IN Equity Buy Hold Reduce0
40
80
120
160
200
Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Oct-20
(Mn
)
Edelweiss Securities Limited
HINDUSTAN UNILEVER
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 15
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HINDUSTAN UNILEVER
Edelweiss Securities Limited
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