Hindustan Unilever Ltd. share price target

We have done SKU level analysis of Hindustan Unilever's (HUVR) soap, detergent and tea portfolio which contributes c. 60% to total revenue. We note that; (i) tea and soap category, FMCG companies have taken price hikes driven by inflationary raw material pricing trend (ii) in tea portfolio HUVR has been highly conservative in taking price hikes while in Soaps it has been aggressive compared to competition (iii) in detergent powder category HUVR has taken price cuts in line with deflationary raw material pricing trend while P&G; has taken price hike. We expect; HUVR to gain volume led market share in both detergent and tea portfolio which contributes c. 33% to total revenue. In soaps...

We upgrade our FY21/22E Revenue estimates by 2%/5% and introduce FY23 estimates. Revise rating to BUY from HOLD earlier with change in TP to Rs. 2,455 (earlier Rs. 2,200) as we continue to value the stock at 53x FY23E EPS.

Hindustan Unilver (HUVR) 2QFY21 result was better with our estimates. Overall business recovers sharply from -7%YoY revenue growth in 1QFY21 to +3% YoY in 2QFY21. Outperformance of health, hygiene and nutrition portfolio (c.80% revenue share, +10%YoY) helped offset c. 25%YoY decline in revenue from discretionary and out-of-home portfolio. Inflationary raw material cost lead to the decline in gross margins however rationalization of advertisement spending helped EBITDA margin to expand marginally. Rural growth remains resilient while urban continues to face COVID headwinds. Management expects raw material inflation to keep gross margin under...