Hindustan Unilever Ltd. share price target

HUL growth prospects and will be earnings accretive: The board of Hindustan Unilever Limited (HUL) has approved the merger of 100% Glaxo SmithKline Consumer (GSK Consumer) with itself for a transaction cost of Rs. 31,700 crore (price to sales of 6.5x) and subject to regulatory and shareholder approvals. The transaction is an all-equity merger with 4.39...

The deal will add 12/14% revenue/APAT and is EPS accretive (~6%) in FY21. Despite richer multiples vs. Zydus-Heinz deal (Complan), we believe this deal is worth the buck considering market leadership position of Horlicks. Our earnings revises by 5%, we don't change multiples and value HUL at 45x P/E on Dec-20 EPS (earlier Sep-20) with TP of Rs 1,855 (earlier Rs 1691). HUL announced merger with GSK Consumer India (GSK CH) with an all equity deal, valuing GSK CH at Rs 317bn. Every share of GSK CH will be exchanged with 4.39 shares of HUL. GSK CH is the category leader (value/volume share of 54/63%) in the Health Food Drinks (HFD) market in India (at Rs 77bn; largest globally), with brands like Horlicks, Boost, Viva and Maltova.

In March 2018, GlaxoSmithKline Plc had announced a strategic review of GSK Consumer Healthcare's (GSKCH) consumer nutrition business, including brands like Horlicks & Boost as the company was exploring a partial or full sale of its stake in GSKCH by end of 2018. This was triggered by GSK looking to help fund its $13 billion buyout of the Novartis stake in...

Hindustan Unilever's big bet on health drinks with GSK acquisition appears positive and we estimate EPS accretion of ~6% from the deal. Management's positive commentary on category growth and synergy benefit targets can drive more upsides we believe. HUL believes category offers strong long term growth given low penetration and huge opportunity for market development and premiumisation. It believes higher distribution...

We believe HUVR has obtained a good deal, which is EPS accretive from the beginning. The company also benefits because (a) the merger is at a reasonable valuation, (b) GSKCH has agreed to a share-swap deal, (c) HUVR has not been saddled with the global business, and (d) being listed, transparency of GSKCH is extremely high. While we continue to have our reservations on category growth in malt-based beverages (MFD), we appreciate what HUVR can bring to the table on premiumization, low unit packs, increased distribution and marketing strength.

Hindustan Unilever Ltd Q2FY19 results Comment Revenue decreased by 2.33% to Rs. 9138.0 Cr in Q2FY19 when compared to the previous quarter. On the other hand, it rose by 11.45% when compared with Q2FY18.

HUL declared its Q2FY19 results recently. The key highlights were as follows: 1. For the quarter, the company's domestic consumer business grew at 12% strongly supported by 10% volume growth. This was mainly due to gradual recovery in demand and a return to normalcy in trade channel. EBIDTA margin expanded by 160 bps. 2. Growth and margin improvement were mainly achieved through a combination of new launches, enhanced reach, product mix & cost saving measures. 3. The company maintained its strategy to focus on volume driven growth and improvement in operating margin through cost saving initiatives while strengthening its portfolio through...

growth can be attributed to uptick in rural demand, strong traction to new launches. OPM improved by 160 BPS to 21.9% due to dip in advertisement cost by 33bps YoY and other cost 2187 crore. There was an EO expense of Rs 35 crore pertaining to restructuring expense as compared EO income of Rs 36 crore for Sep 17 quarter pertaining to sale of equity shares in Kimberly Clark lever. PBT after EO thus stood at Rs 2152 crore up by 19%. After providing total tax of Rs 627 crore, PAT for Sep 18 quarter stood at Rs 1525 crore up by 20% YoY. During the quarter, revenue of the home care category grew by 12%, with sustained doubledigit volume-led growth across key categories. PBIT margin of the home care category...

ICICI Securities Ltd | Retail Equity Research HUL reported a healthy set of numbers with revenue growth of 11.1% YoY on the back of 10% volume growth. The strong volume growth was mainly on account of double digit growth seen across all segments in addition to new launches gaining traction. Home care (34% of revenue), personal care (47% of revenue) and foods &...

There is no doubt that the company's execution is ahead of the market and it is gaining market share but valuations are also lofty with the stock trading at 46x FY20E earnings. To meet the consensus earnings expectations and justify the current valuations the price hikes needed could be much higher. We believe there are material risks to the company meeting estimates as base effect starts receding in the forthcoming quarters while the market growth remain...

The double-digit volume growth delivered by Hindustan Unilever (HUL) in Q2FY19 is impressive and marginally ahead of expectations, indicating continued improvement in consumer demand driven by rural recovery. Despite rising input cost pressures, management is confident of delivering a modest operating margin expansion, driven by pricing actions and cost efficiencies. EBITDA...

HUL has delivered another strong quarterly performance, with double digit sales YoY growth across all three divisions of home, personal care and food. Overall domestic volume growth was in line with estimates at 10% for Q2FY19 versus 12% sequentially and 4% YoY. Net sales grew 11.1% YoY to Rs 92.3 bn indicating a YoY price increase of meagre 1.1% because of intense competition. However, the company is growing ahead of the industry on the back of WIMI strategy, as also innovations and activations. The company also continues to make margin gains through cost management and favorable...

We value HUL based on 45x P/E on Sep-20 EPS to arrive at TP of Rs 1,691. HUL was our top pick, but considering rich valuation and limited upside, we downgraded the stock in 1QFY19 to NEUTRAL. HUL reported another quarter of broad-based growth with revenues growing by 12.5% (exp. 13%) with adjustment of 1% fiscal refunds. Volume growth was healthy at 10% (exp. 9%) driven by rural recovery, favorable base (4% in 2QFY18) and market share gain. Robust margin expansion resulted in EBITDA/APAT growth of 20/23% (exp. 18/18%).

HUL's volume performance was in line with our estimate (+10%) while the operational performance was a beat. Volume growth was led by (1) improvement in rural growth (1.2-1.25x urban) (2) and increase in sales reach. We believe that the performance was encouraging as in the fourth consecutive quarter the company has delivered double digit volume growth and margin expansion. We expect that the volume growth would reduce to single digit due to unfavorable base; 6%+ volume growth over a medium-term can be taken sanguinely considering the size of the...

the quarter, revenue of the home care category grew by 12%, with sustained double-digit volume-led growth across key categories. PBIT margin of the home care category improved by ~200 BPS y-o-y to 16% in Q2FY2019. The personal care category registered revenue growth of 10.4%, with skin care, hair care and personal wash segments registering doubledigit growth. PBIT margin of the personal care...

Another best-in-class delivery but largely in the price now HUL's 2QFY19 key operating metrics comprising volume growth of 10%, revenue growth of 12% and 160bps expansion in operating margin were undoubtedly strong and commendable but were all bang on expected lines and no more a massive positive surprise as such. We expect the stock to be more range-bound hereonwards. Focus would be more on what the volume delivery for 3QFY19 and thereafter would be, since double-digit volume growth' would be in the base from 3Q onwards. Management remains quite confident and upbeat; key commentaries: 1) Demand outlook is stable. 2) Rural growing ahead of urban....

12 October 2018 to INR92.3b in 2QFY19. Domestic comparable consumer business sales increased 12% YoY, with underlying volume growth of 10% YoY (in-line). EBITDA grew 20% YoY to INR20.2b (our led by RM inflation. However, EBITDA margin expanded 160bp YoY to 21.9%, driven by cost efficiencies and operating leverage. PAT grew 11.2%, 20.3% and 22.2%, respectively. Demand sustained in 2QFY19; expected to be stable in near term. (2) Rural growth continues exceeding urban growth.

Rural continues to grow ahead of urban (but has still not accelerated to the pace seen a few years ago vis--vis urban growth). Rural volumes are now growing at 1.5x of urban while value is at 1.3x of urban. Management stated that two-year CAGR on volumes should be in the range of 6-8%, going forward, which augurs well for growth in subsequent quarters. Crude and currency are playing an active role in driving up inflation in the home care product portfolio. In the personal care portfolio, oil costs have remained benign. HUL has taken a price hike of 3-4% across products and stock keeping unit (SKUs) in the home care, household care and laundry portfolio, and some hike in the personal care portfolio as well, during the quarter. Some of the price hikes taken may be reflected in the subsequent quarter. Company believes the inflation level is not alarming and should get mitigated by pricing action and cost savings.

We have increased our PAT estimates by ~6% for FY19E and FY20E mainly due to strong operating performance. While demand recovery, broad based growth across segments are some of the key positives, current steep valuations of 50x FY20E and 43x FY21E offers limited upside. Hence, we downgrade the stock to HOLD from BUY with a revised rolled...