Hindustan Unilever Ltd. share price target

Hindustan Unilever (HUVR IN) performance was subdued and below our and consensus estimates on key headline numbers. Domestic sales growth came in lower at 9.4% YoY (2.5% our estimate) driven by a 7% decline in underlying volume growth (3% our estimate).

Hindustan Unilever Ltd (HUL), India's largest listed consumer packaged goods firm 70 bps contraction in operating profit margin (OPM) to 22.8%, dragged operating profit down by 12% to Rs 2100 crore. With other income standing higher by 134% to Rs 264 crore, the degrowth at PBIDT was restricted to 6% to Rs 2364 crore. After accounting for higher interest cost...

We believe the lockdown would impact Q1FY21 financials in even bigger way given first 20 days of April manufacturing was at extremely low utilisation. Further, we believe even in May, facilities would be working below optimum utilisation with continuance of labour and supply chain problems. On the demand front though, essentials (soaps, sanitisers, floor cleaners, personal hygiene products & tea) would continue to witness higher growth. However, certain discretionary categories (cosmetics, skin products, ice creams, etc.) would see subdued growth in H1FY21E. We...

We maintain Buy rating and remain positive on HUVR from a medium-term perspective due to (a) best of breed earnings growth potential, (b) significant synergies in FY22E as a result of GSKCH, and (c) its RoCE levels Distributor and trade inventory were down significantly in Mar20 but are at 75-80% of the normal levels over the last 10 days. Additionally, (a) strong balance sheet, (b) robust cash flow generation and increasing willingness in recent years to use cash flow for inorganic growth, (c) excellent management quality/ corporate governance, and (d) proven track record of consistent delivery even in a weak consumption environment further strengthens our We remain positive on HUVR from a medium-term perspective due to (a) best of breed earnings growth potential beyond the near term owing to its portfolio and execution strengths, (b) significant synergies in FY22E as a result of GSKCH, and (c) its RoCE levels being well ahead of peers.

HUL announced culmination of GSK merger with 2 key changes 1) acquisition of brand Horlicks for India territory for Rs30.5bn and 2) only distribution rights for OTC brands of GSK with marketing being with Glaxo. The integration path remains quite lengthy and near term hopes rest on ability of HUL to place Horlicks and Boost in small packs using its 3x bigger distribution. Medium to long term gains would test HUL's ability to undertake brand extensions in other food products and compete with nutrition brands like Pediasure in the high science nutrition segment, given that it now owns...

Investment Strategy report for FY 21. The strategy advised is keeping in mind the current challenging environment and contains stock recommendations with short & long term view.

The transaction is subject to fulfilment of certain conditions and both companies would be working together to complete this in the next few months. Glenmark, however, will continue to manage the business until the...

crude decline given volatile pricing scenario. Near term visibility looks hazy given uncertainty on COVID19, however we believe that expected demand recovery from 1QFY21 will be for sure pushed back to 2HFY21. We believe acquisition of VWash brand from Glenmark is positive although it is unlikely Despite near term challenges, we remain positive on HUVR's ability to gain from 1) ability to straddle though products and price points 2) maximum range of new generation products (handwash, body/face wash, hair conditioners, green tea, liquid detergents) 3) most agile and efficient supply...

Moreover, its CAGR performance in the last 5 years/3 years at ~14%/19% has been even more impressive, given the weak earnings growth posted by (much smaller) peers in recent years, amidst a weak operating environment. An unprecedented EBITDA margin improvement of >900bp YoY over the past 10 years ending FY20E has been led by factors such as (a) superior nimbleness in response to raw material cost and competitive stimuli, which has been boosted further by best-of-breed analytics, (b) strong execution of its Winning in Many India (WIMI) strategy, herbal products and more recently on acquisitions as well, and (c) emphasis on premiumization with rigorous focus on cost savings at the same time. performance in the last 3 years at ~8%/~19/~19% and in the last 5 years at ~6%/~14/~14% has been even more impressive, given the weak earnings growth posted by (much smaller) peers in recent years, amidst a weak operating environment.

Even though the short-term demand remains challenging, given the supporting policies presented in Union Budget for FY20-21, we maintain HOLD rating on the stock with a revised target price of Rs. 2,275 based on 50x FY22E adj. EPS. Revenue growth remains positive despite demand concerns In Q3FY20, company reported revenue growth of 2.6% YoY to Rs. 9,808cr, despite declining demand trajectory from both rural and urban markets and peak retail inflation. Food & Refreshment segment (+7.9% YoY to 1,865 cr.) and Home Care...