Hindustan Unilever Ltd. share price target

HUL's Annual Investor Meet reinforced our positive stance on long term growth potential and business strategy of the company. HUL continues to ride on twin engines of new category creation and innovation in existing segments to remain ahead of the competition. We believe sustained investment in categories like Liquid Detergents, face wash, Hand wash,...

The decentralization of strategy to a customized level by regional teams (with guardrails provided by top management) is aiding flexibility (exemplified by the WIMI strategy), and also freeing up top management time to 'focus on longer-term goals, manage disruption,explore inorganic growth opportunities, and land bigger and faster innovation (speed-to-market up 40% in recent years).

HUVR delivered an in-line performance in Q4FY19 (7% UVG, 13% EBITDA growth) with continued EBITDA Margin expansion of 80bps. This performance of HUL is laudable as it out-did peers in the FMCG category given the challenging demand environment.

Gross margin reduced by 60 bps to 50.9% Y-O-Y on account of inflated crude oil prices. However, Operating profit increased by 13% Y-O-Y to `2321crs in Q4FY19. The EBITDA margin stood at 23.3% as opposed to 22.5% in Q4FY18, an expansion of 80bps. led by a reduction in employee cost, advertisement expenses, and other expenses by 40 bps, 70...

growth of 7% can be attributed to strong traction to new launches. OPM improved by 80 BPS Rs 134 crore. Thus PBT was up by 14% to Rs 2298 crore. There was an EO expense of Rs 71 crore pertaining to restructuring expense, provision towards purifier devices as compared EO expense of Rs 64 crore towards restructuring expense. PBT after EO thus stood at Rs 2227...

Volume led performance amidst slow rural consumption HUL's volume growth (+7%) and operational results were in line with our estimate. We are positive about this as (1) the base was unfavorable (+11%) and (2) the industry, across categories, is experiencing a slowdown. We expect the volume growth to remain in high single digit, due to an unfavorable base in the next few quarters. Even a 6%+ volume growth is a positive, given the size of the company. In addition, the GM and EBITDA margin increase on an unfavourable base (highest Q4 EBITDAM in 10...

products reported a 13% revenue growth with sustained double-digit volume-led growth across key categories. PBIT margin of the home care category improved by 127 BPS y-o-y to 16.4% supported by new launches. Beauty and personal care products registered a revenue growth of 7% with skin-care, hair-care, colour cosmetics and personal wash segments...

Leveraging direct reach & building blocks in e-commerce Consumer companies have been historically dependent on wholesale channel as its main trade channel. HUL, which has total reach of 7 million outlets, has built its direct reach over the period and it stands at around 50%; much higher than other FMCG players. This gives it an edge over its peers, especially when the wholesale channel is under pressure. Proactively, HUL is also increasing its presence in e-commerce (3% of turnover) which has been growing at a fast pace post GST implementation. Additionally, HUL...

In 2017, our upgrade on HUL was led by the rationale that the company will outperform its peers during a challenging environment. After a 70% run-up in the stock (post our upgrade), we downgraded HUL as we believed that the stock priced in all the near term positives and hence everything had to go right (which didn't). We maintain our NEUTRAL rating, which may change with (a) Further time correction in the stock, (b) Recovery in rural demand and (c) Successful integration of GSK portfolio (ability to surprise on margin expansion). HUL reported a healthy quarter (in-line) in the context of challenging macros. Notwithstanding its scale, HUL maintained growth leadership over the last 6 quarters (10% volume growth) led by strong product portfolio and remarkable execution. We continue to maintain our NEUTRAL rating since we downgraded in Jul-18 (stock is flat since then) as we dont see any near-term trigger. We value HUL at 45x on FY21 EPS arriving at a TP of Rs 1,804.

4 May 2019 with net sales growth of 9.3% YoY to INR99.5b, EBITDA growth of 13.3% YoY to INR23.2b and PAT (bei) up by 12.8% YoY to INR15.9b. Domestic consumer business sales were up 9% YoY, led by underlying volume growth of 7% YoY. Home care saw strong volume led growth (up 13% YoY) with 120bp YoY improvement in margins. PAT grew by 10%, 11%, 18.7% and 18.4%, respectively. EBITDA margin expanded 150bp to 22.6%.