Hindustan Unilever Ltd. share price target

The GSK Group sold a 5.7% stake (13.37 crore shares) in Hindustan Unilever Limited (HUL) through multiple block deals in the open market at an average price of Rs. 1,902 per share. The stock has corrected by ~16% from its high and its currently trading at 48.1x its FY2022E earnings. GSK Group selling the stake has reduced supply overhang on the stock and the current valuations factors in a sluggish Q4 due to supply disruption caused by the nationwide lockdown in the fag-end of the quarter. We expect supply disruption to sustain in the coming months till the time the nation recovers from the pandemic situation. Thus, H1FY2021 would see HUL's sales significantly...

Company posted 9.4% declines in Q4FY20 revenue to Rs. 9,011cr, primarily impacted by breakage of supply chain (company plants now running at 70-75% utilization) and subdued demand amidst nationwide lockdown post mid-March. Company witnessed weaker revenue across all three segments with Beauty & Personal Care segment leading the declines (-13.5% YoY) while followed by Food & Refreshments (-6.7%) and Home Care (-4.3%). For FY20, company managed to achieve 1.5% YoY growth in...

Gross margin expanded by ~138 bps to 52.43% Y-o-Y on account of benign commodity prices. EBITDA decreased by 11% Y-o-Y to `2,065 crs in Q4FY20 led by higher ad spends, partly offset by lower staff costs and other expenses. Reported EBITDA margin stood at 22.9% as opposed to 23.9% in Q4FY19, contracted by 40 bps (160bps...

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...