Hindustan Unilever Ltd. share price target

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...

16 September 2020 Detergents, Tea, Oral Care, etc. Of the remaining 20% portfolio, 15% declined by 45% while the rest 5% declined by 69% during the quarter. Skin Care the largest segment of the remaining 20% portfolio performed poorly in 1QFY21, but has started to recover consistently since June (although it is yet to turn positive YoY). With the Ice-Cream business being a washout in 1QFY21, it contributed significantly to business decline in the quarter. However, the Ice-Cream business is much less salient in the base quarter of 2QFY21 (2QFY20) v/s 1QFY21. Therefore, 2QFY21 is not expected to be as drastically impacted by the Ice-Cream business as 1QFY21. The GSK business was affected by temporary plant shutdowns due to COVID- led disruption and some labor issues. The temporary shutdown at HUVRs Haridwar plant due to COVID issues did not affect operations owing to adequate inventory buffers.

Company rebuilt supply chain, launched 50 products; rationalised of SKUs to supply relevant products and enhanced capacity of sanitisers (by 120x) and handwash (by 6x) to capture growing demand. HUL focuses on improving profitability through cost-savings; synergistic...