Hindustan Unilever Ltd. share price target

17 January 2019 to INR95.6b in 3QFY19. Domestic comparable consumer business sales were up 13% YoY, with underlying volume Sales/EBITDA/adj. Rural growth continues exceeding urban growth (1.3x in 3QFY19).

HUL delivered yet another quarter of robust underlying volume growth momentum, which was broadly in line with expectations. While growth was broad-based across segments, earnings delivery was strong led by flattish growth in staff/overheads and moderation in A&P; spends

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...

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'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...

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...