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Hindustan Unilever Limited is engaged in
fast-moving consumer goods business comprising home and personal care, foods
and refreshments. The Company's segments are Soaps and Detergents, which
includes soaps, detergent bars, detergent powders, detergent liquids and scourers;
Personal Products, which includes products in categories of oral care, skin
care (excluding soaps), hair care, deodorants, talcum powder, color cosmetics
and salon services; Beverages, which includes tea and coffee; Packaged Foods,
which includes branded staples (atta, salt and bread), culinary products
(tomato-based products, fruit-based products and soups) and frozen desserts,
and Others that includes exports, chemicals, water business and infant care
products. The Others segment also includes export sale of marine and leather
products. Its brands include Lux, Surf excel, Rin, Wheel, Fair & Lovely,
Pond's, Vaseline, Lakme, Dove, Clinic Plus, Sunsilk, Axe, Brooke Bond, Bru,
Knorr, Kissan, Kwality Wall's and Pureit.
Business Growth :
Input inflation to improve the sales growth;
HUL is
seeing gradual recovery in demand with wholesale channel is yet to normalize.
However, the company is expecting improvement in growth driven by revival in
rural demand. GST will not have any impact on volumes as inventory levels
already low
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Company continues to focus on new products/categories like Ayush (Ayurveda)
& Baby products and is also investing towards market development (~25% of
sales) where the penetration levels. No down-trading was witnessed in the
DeMon period
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Sustained premiumisation trend across categories is encouraging with a focus
on sustained improvement in margins. We believe input inflation will improve
the value/volume mix which was impacted in the recent past with growth mainly
driven by volumes. We retain our estimates and maintain ACCUMULATE with
target of Rs 950.
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INVESTMENT
ARGUMENT:
Recovery is gradual; expects to gain momentum
HUL is seeing gradual recovery in
demand with wholesale channel is yet to normalize and green shoots which were
visible pre-DeMon has taken a pause. However, the company is expecting
improvement in growth driven by revival in rural demand and indicated that
GST will not have any impact on volumes as company has been focusing on
keeping inventory levels low at the wholesale channel since last one year.
Focus has been on improving the direct reach (3mn outlets) through technology
(data analytics) and better assortment at the retail outlets. Revival in
rural will be driven by good monsoons and increase spend on rural by the
government.
Premiumisation continues; Focus on new products
& innovation
No down-trading by the consumer
witnessed during the DeMon period although shift towards lower unit packs
(LUP) was visible across categories. Company continues to focus on new
products/categories like Ayush (Ayurveda) & Baby products and is also
investing towards market development (~25% of sales) where the penetration
levels are significantly low like fabric conditioner, fabric liquid, liquid
dish wash, body wash, green tea etc. Categories with low penetration are
witnessing strong double digit growth.
Financial Result:
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Income Statement
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Particulars
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Dec-16
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Sep-16
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June-16
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Revenue
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8317.94
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8480.26
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8128.18
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Other Income
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82.44
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252.83
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107.59
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Total Income
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8400.38
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8733.09
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8235.77
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Expenditure
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-6809.45
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-7057.40
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-6421.52
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Interest
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-4.56
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-4.94
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-5.95
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PBDT
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1586.37
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1670.75
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1808.30
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Depreciation
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-100.0
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-94.50
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-93.29
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PBT
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1486.17
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1576.25
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1715.01
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Tax
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-448.24
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-480.65
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-541.11
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Net Profit
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1037.93
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1095.60
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1173.90
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Equity
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216.43
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216.43
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216.43
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Highlights the fact:
1)HUL is seeing gradual recovery in demand with
wholesale channel is yet to normalize and green shoots .
2)Company continues to focus on new
products/categories like Ayush (Ayurveda) & Baby products.
3)GST will not have any impact on volumes as inventory
levels already low.
4)Reduction in promotion and calibrated price hikes
covers up the increase in input cost.
5) Categories with low penetration are witnessing strong double digit
growth.
Technically View:
The stock is currently trading above 50 days and 100 days, moving
average that is all about good bullish& uptrend signal on daily base. RSI
&MFI is present at 57 and 75respectivally, which is side ways&
showing the uptrend formation for the short term period. The stock is
currently in uptrend and now somemore upside is expecting with major support
is found 870level. MACD line is greaterthen signal line 10 day Avg Volume is
very high.
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VALUATION
& OUTLOOK:
Sustained premiumisation trend
across categories is encouraging with a focus on sustained improvement in
margins. We believe input inflation will improve the value/volume mix which
was impacted in the recent past with growth mainly driven by volumes.
Reduction in promotion and calibrated price hikes covers up the increase in
input cost. We retain our estimates and maintain ACCUMULATE with a target
price of Rs 950.
CONCLUSION:
Hindunilever accumulate with the stop loss
would be below Rs 870and would buy on
any dip, it could be Rs 890. If it were to cross Rs 905, then also buy, that
is going to be upward formation and the
target would be Rs 950 but the short-term target
remains around Rs 950.
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