HINDUSTAN UNILEVER LIMITED
Result Update: Q2 FY14
BUY
CMP
603.00
Target Price
663.00
OCTOBER 28th 2013
ISIN: INE030A01027
Index Details
SYNOPSIS
Stock Data
Sector
BSE Code
Face Value
52wk. High / Low (Rs.)
Volume (2wk. Avg.)
Market Cap (Rs. in mn.)
Hindustan Unilever Limited (HUL) is India's largest
Fast Moving Consumer Goods Company with a
heritage of over 75 years in India and touches the
lives of two out of three Indians.
FMCG
500696
1.00
725.00/432.25
173000
1304047.80
Unilever PLC increased its stake in Hindustan
Unilever Ltd from 52.48% to 67.26%.
During the quarter, the robust growth of Net profit
is increased by 13.25% to Rs. 9138.00 million from
Rs. 8069.20 million in previous year period.
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS
Net Sales
EBITDA
Net Profit
EPS
P/E
FY13A
258102.10
52190.50
37966.70
17.56
34.35
FY14E
286493.33
54216.84
39757.23
18.38
32.80
FY15E
312277.73
58685.31
43020.60
19.89
30.31
Revenue for the quarter rose by 9.22% to Rs.
68926.40 million from Rs. 63108.10 million, when
compared with the prior year period.
Hindustan Unilever has declared an Interim
Dividend of Rs. 5.50/- per equity share of face value
of Re. 1/- each for the financial year 2013-14.
Shareholding Pattern (%)
The Company has approved an additional
investment in the equity shares of Bhavishya
Alliance Child Nutrition Initiatives.
During the quarter, Domestic Consumer Business
(FMCG + Water) grew by 9.9% with a 8.9% growth
in HPC and 14.6% growth in Foods businesses.
Beverages and Packaged Foods segment of HUL
grew by 17% and 9% respectively during the
quarter.
1 Year Comparative Graph
During the quarter, Profit before Interest and Tax
grew by 11% with PBIT margin improving +20 bps.
Soaps and Detergents category grew by 6%,
registering its fourth successive quarter of double
digit volume growth.
HINDUSTAN UNILEVER LTD
Net Sales and PAT of the company are expected to
grow at a CAGR of 12% and 17% over 2012 to
2015E respectively.
S&P BSE SENSEX
PEER GROUPS
CMP
MARKET CAP
EPS
P/E (X)
P/BV(X)
DIVIDEND
Company Name
(Rs.)
Rs. in mn.
603.00
329.05
181.25
835.15
1304047.80
2607017.20
316066.10
284266.90
(Rs.)
17.56
9.73
3.46
15.46
Ratio
34.35
33.82
52.38
54.02
Ratio
48.78
11.70
19.81
10.30
(%)
1850.00
525.00
150.00
500.00
Hindustan Unilever Ltd.
ITC Ltd
Dabur India Ltd
Godrej Consumer Ltd
Recommendation & Analysis - ‘BUY’
Hindustan Unilever Ltd has posted a net profit of Rs. 9138.00 million for the quarter ended September 30, 2013
as compared to Rs. 8069.20 million for the quarter ended September 30, 2012. Total Income has increased from
Rs. 64595.60 million for the quarter ended September 30, 2012 to Rs. 70436.30 million for the quarter ended
September 30, 2013.2013. During the quarter, the Domestic Consumer business grew at 10%, ahead of market,
driven by 5% underlying volume growth.
Soaps and Detergents category grew by 6%, registering its fourth successive quarter of double digit volume
growth with Lifebuoy, Breeze and Lux leading category growth. In Laundry, growth continued to be led by Surf
and Rin while Wheel sales showed signs of stabilizing. Personal Products category grew by 12% in a slowing
market, aided by a favorable comparator and good sales in advance of winter. Beverages grew by 16% due to mix
improvements and strong in-market activities. The continued thrust on market development for tea bags enabled
flavored and green teabags sales to nearly double in the quarter. Packaged Foods grew 9%, Kissan maintained its
double digit growth with a very good quarter for Ketchups while Knorr sales was driven by Instant Soups and
Kwality Walls stepped up to double digit growth through sharper in-market execution and the rollout of the
‘Perfect Stores’ program for the category.
The operating context during the quarter was challenging given the volatile cost environment, led by the Rupee
depreciation, and heightened competitive intensity. Overall industry media spend was up to its highest levels in
over 18 quarters, with a particularly sharp increase in Oral Care. The Company has invested at competitive levels
across segments with a significant step up in Personal Products – overall A&P spend was up by Rs.185 Crores
(+165 bps) in the quarter. Despite a sharp increase in A&P spends, Profit before Interest and Tax (PBIT) grew by
11% with PBIT margin improving +20 bps.
Over FY2012-15E, we expect the company to post a CAGR of 12% and 17% in its top-line and bottom-line
respectively. Hence, we recommend ‘BUY’ for ‘Hindustan Unilever Ltd’ with a target price of Rs. 663.00 on
the stock.
QUARTERLY HIGHLIGHTS (STANDALONE)
Results updates- Q2 FY14,
Hindustan Unilever Limited (HUL) is India's largest
Months
Sep-13
Sep-12
% Change
Net Sales
68926.40
63108.10
9.22
lives of two out of three Indians, reported its
PAT
9138.00
8069.20
13.25
financial results for the quarter ended 30th Sep,
EPS
4.23
3.73
13.21
2013.
EBITDA
12697.30
11270.70
12.66
Fast Moving Consumer Goods Company with a
heritage of over 75 years in India and touches the
The company’s net profit jumps to Rs. 9138.00 million against Rs. 8069.20 million in the corresponding quarter
ending of previous year, an increase of 13.25%. Revenue for the quarter rose by 9.22% to Rs. 68926.40 million
from Rs. 63108.10 million, when compared with the prior year period. Reported earnings per share of the
company stood at Rs. 4.23 a share during the quarter, registering 13.21% increase over previous year period.
Profit before interest, depreciation and tax is Rs. 12697.30 millions as against Rs. 11270.70 millions in the
corresponding period of the previous year.
Break up of Expenditure
Rs. Millions
Break up of Expenditure
Q2 FY14
Q2 FY13
Advertising & promotion
9540.20
7689.80
Other Expenses
10150.90
9651.50
Cost of Material Consumed
29230.30
27008.40
Employee Benefit Expenses
3683.00
3304.90
Depreciation &
Amortization Expense
639.20
576.90
Purchase of Stock in Trade
8122.70
8260.30
Segment Revenue
Latest Updates
•
Hindustan Unilever Ltd has declared an Interim Dividend of Rs. 5.50/- per equity share of face value of Re.
1/- each for the financial year ending March 31, 2014.
•
The Company has approved an additional investment in the equity shares of Bhavishya Alliance Child
Nutrition Initiatives, to make it a wholly owned subsidiary of the Company.
•
Net Sales grew by 9.22% during the quarter. Domestic Consumer Business (FMCG + Water) grew by 9.9%
with a 8.9% growth in HPC and 14.6% growth in Foods businesses.
•
Beverages and Packaged Foods segment of HUL grew by 17% and 9% respectively during the quarter.
COMPANY PROFILE
Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods Company with a heritage of
over 75 years in India and touches the lives of two out of three Indians. HUL works to create a better future every
day and helps people feel good, look good and get more out of life with brands and services that are good for
them and good for others.
With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care, toothpastes,
deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers, the Company is a part of the
everyday life of millions of consumers across India. Its portfolio includes leading household brands such as Lux,
Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent,
Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit.
The Company has over 16,000 employees and has an annual turnover of around Rs. 258102.10 milions (financial
year 2012 - 2013). HUL is a subsidiary of Unilever, one of the world’s leading suppliers of fast moving consumer
goods with strong local roots in more than 100 countries across the globe with annual sales of about € 51 billion
in 2012. Unilever has about 52% shareholding in HUL.
In April, 2012, the Customer Insight & Innovation Centre (CiiC) was inaugurated at the Hindustan Unilever
campus at Andheri, Mumbai.
In 2011 Uniliver spent €1 billion on research & development. Currently the company has over 6000 people
working in R&D in all Unilever regions across the globe. The company typically files between 250 & 350 new
patent applications a year. Worldwide the company has over 20 000 registered patents & patent applications.
Brands:
•
Food Brands
•
Home Care Brands
•
Personal Care Brands
•
Water
•
Nutrition
•
Health, Hygiene & Beauty
Products
Food Products
Brooke Bond 3 Roses
Kissan
Brooke Bond Red Label
Kwality Wall’s
Brooke Bond Taj Mahal
Modern
Annapurna
Knorr
Brooke Bond Taaza
Lipton
Bru
Brooke Bond Sehatmand
Home care brands
Active Wheel
Rin
Cif
Sunlight
Comfort Fabric Conditioner
Surf Excel
Domex
Vim
Personal care brands
Aviance
Hamam
Axe
Liril 2000
LEVER Ayush Therapy
Lux
Breeze
Pears
Clear
Pepsodent
Clinic Plus
Sunsilk
Closeup Gel Toothpaste
Ponds
Dove
Rexona
Fair & Lovely
Vaseline
Water
Pureit Marvella RO
Pureit Marvella
Pureit Classic 14 litres
Pureit Classic 23 litres
FINANCIAL HIGHLIGHT (STANDALONE)
(A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March31, 2012 -2015E
Hindustan Unilever Ltd.
SOURCES OF FUNDS
Shareholder's Funds
Share Capital
Reserves and Surplus
1. Sub Total - Net worth
FY12A
FY13A
(Rs.in.mn)
FY14E
FY15E
2161.50
32967.80
35129.30
2162.50
24577.70
26740.20
2162.60
45456.35
47618.95
2162.60
55229.47
57392.07
3296.90
6669.50
9966.40
4762.50
7063.40
11825.90
5334.00
7345.94
12679.94
5867.40
7566.31
13433.71
46229.60
5467.70
12789.70
64487.00
109582.70
51676.90
6161.50
18720.20
76558.60
115124.70
58911.67
8502.87
9172.90
76587.43
136886.32
62446.37
10203.44
10273.65
82923.46
153749.24
21175.30
299.40
2051.30
103.20
23629.20
1863.10
4012.70
2142.40
0.00
31647.40
22567.90
361.10
2053.20
103.20
25085.40
5480.30
3842.90
2047.80
2968.40
39424.80
24261.88
397.21
2176.39
111.46
26946.94
6905.18
5226.34
2150.19
3146.50
44375.15
26451.01
428.99
2263.45
115.91
29259.36
7802.85
6219.35
2279.20
3461.15
49021.92
22519.00
25166.5
6789.90
18300.40
4807.00
352.50
77935.30
109582.70
17826.30
25269.90
8334.80
17078.90
6482.60
707.40
75699.90
115124.70
23530.72
27038.79
8834.89
24926.64
7260.51
919.62
92511.17
136886.32
27766.24
28715.32
9577.02
29164.17
8349.59
1154.98
104727.32
153749.23
Non Current Liabilities
Other Long term Liabilities
Long Term Provisions
2. Sub Total - Non Current Liabilities
Current Liabilities
Trade Payables
Other Current Liabilities
Short Term Provisions
3. Sub Total - Current Liabilities
Total Liabilities (1+2+3)
APPLICATION OF FUNDS
Non-Current Assets
Fixed Assets
Tangible assets
Intangible assets
Capital Work in Progress
Intangible assets under development
a) Sub Total - Fixed Assets
b) Non-current investments
c) Long Term loans and advances
d) Deferred Tax Asset
e) Other non-current assets
1. Sub Total - Non Current Assets
Current Assets
Current Investment
Inventories
Trade receivables
Cash and Bank Balances
Short-terms loans & advances
Other current assets
2. Sub Total - Current Assets
Total Assets (1+2)
Annual Profit & Loss Statement for the period of 2012 to 2015E
Value(Rs.in.mn)
FY12A
FY13A
FY14E
FY15E
12m
221163.70
12m
258102.10
12m
286493.33
12m
312277.73
Other Income
2783.10
6069.00
6372.45
6691.07
Total Income
223946.80
264171.10
292865.78
318968.80
Expenditure
-187061.60
-211980.60
-238648.94
-260283.49
36885.20
52190.50
54216.84
58685.31
-12.40
-251.50
-259.05
-246.09
Gross profit
36872.80
51939.00
53957.79
58439.22
Depreciation
-2182.50
-2360.20
-2525.41
-2676.94
Profit Before Tax
34690.30
49578.80
51432.38
55762.28
Tax
-7776.30
-11612.10
-11675.15
-12741.68
Net Profit
26914.00
37966.70
39757.23
43020.60
Equity capital
2161.50
2162.50
2162.60
2162.60
Reserves
32961.10
24571.00
45456.35
55229.47
Face value
1.00
1.00
1.00
1.00
EPS
12.45
17.56
18.38
19.89
Description
Net Sales
Operating Profit
Interest
Quarterly Profit & Loss Statement for the period of 31st Mar, 2013 to 31st Dec, 2013E
Value(Rs.in.mn)
31-Mar-13
30-Jun-13
30-Sep-13
31-Dec-13E
Description
Net sales
3m
64658.10
3m
68090.40
3m
68926.40
3m
71683.46
Other income
1058.30
1767.50
1509.90
1585.40
Total Income
65716.40
69857.90
70436.30
73268.85
Expenditure
-54846.30
-56171.90
-57739.00
-59999.05
Operating profit
10870.10
13686.00
12697.30
13269.80
-60.10
-62.20
-62.80
-55.26
Gross profit
10810.00
13623.80
12634.50
13214.53
Depreciation
-614.20
-664.40
-639.20
-651.98
Profit Before Tax
10195.80
12959.40
11995.30
12562.55
Tax
-2323.80
-2766.90
-2857.30
-2889.39
Net Profit
7872.00
10192.50
9138.00
9673.16
Equity capital
2162.50
2162.50
2162.60
2162.60
Face value
1.00
1.00
1.00
1.00
EPS
3.64
4.71
4.23
4.47
Interest
Ratio Analysis
Particulars
FY12A
FY13A
FY14E
FY15E
12.45
17.56
18.38
19.89
EBITDA Margin (%)
16.68%
20.22%
18.92%
18.79%
PBT Margin (%)
15.69%
19.21%
17.95%
17.86%
PAT Margin (%)
12.17%
14.71%
13.88%
13.78%
48.43
34.35
32.80
30.31
ROE (%)
76.63%
142.02%
83.49%
74.96%
ROCE (%)
111.23%
204.05%
119.16%
106.92%
EV/EBITDA (x)
34.84
24.66
23.59
21.72
Book Value (Rs.)
16.25
12.36
22.02
26.54
P/BV
37.11
48.78
27.39
22.72
EPS (Rs.)
P/E Ratio (x)
Charts
OUTLOOK AND CONCLUSION
At the current market price of Rs.603.00, the stock P/E ratio is at 32.80 x FY14E and 30.31 x FY15E
respectively.
Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.18.38 and
Rs.19.89 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 17% over 2012 to 2015E
respectively.
On the basis of EV/EBITDA, the stock trades at 23.59 x for FY14E and 21.72 x for FY15E.
Price to Book Value of the stock is expected to be at 27.39 x and 22.72 x respectively for FY14E and FY15E.
We expect that the company surplus scenario is likely to continue for the next three years, will keep its
growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs.663.00 for Medium to Long term investment.
INDUSTRY OVERVIEW
The size of the Indian FMCG industry is estimated at around Rs. 250000 crores representing nearly 2.5% of the
country’s GDP. The industry has tripled in size over the last 10 years and has grown at approximately 17% CAGR
in the last 5 years driven by rising income levels, increasing urbanization, strong rural demand and favourable
demographic trends. These growth drivers, coupled with the low levels of penetration and per capita usage in
India, are expected to result in robust industry growth in excess of 15% per annum over the medium-term.
Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this
category include all consumables (other than groceries/pulses) people buy at regular intervals. The most
common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged
foodstuff, and household accessories and extends to certain electronic goods. These items are meant for daily of
frequent consumption and have a high return.
A major portion of the monthly budget of each household is reserved for FMCG products. The volume of money
circulated in the economy against FMCG products is very high, as the number of products the consumer use is
very high. Competition in the FMCG sector is very high resulting in high pressure on margins.
FMCG companies maintain intense distribution network. Companies spend a large portion of their budget on
maintaining distribution networks. New entrants who wish to bring their products in the national level need to
invest huge sums of money on promoting brands. Manufacturing can be outsourced. A recent phenomenon in the
sector was entry of multinationals and cheaper imports. Also the market is more pressurized with presence of
local players in rural areas and state brands
Scope of the Sector
The FMCG market in India is growing at a fast pace despite of the economic downtrend. The increasing
disposable income and improved standard of living in most tier II and tire III cities are spearheading the FMCG
growth across the nation. The changing profile and mind set of the consumers has shifted the thought to “Value
for Money” from “Money for Value”.
According to a FICCI-Technopak report, India's FMCG sector is poised to reach US$ 43 billion by 2013 and US$ 74
billion by 2018. The report states that implementation of the proposed goods and services tax (GST) and the
opening of foreign direct investment (FDI) are expected to fuel growth further and raise the industry's size to
US$ 47 billion by 2013 and US$ 95 billion by 2018.
At present, rural consumers spend about US$ 9 billion per annum on FMCG items and product categories such as
instant noodles, deodorant and fabric, with the pace of consumption growing much faster than urban areas, as
per the findings.
Over the years companies like HUL, ITC and Dabur have improved performance with innovation and strong
distribution channels. Their key categories have strengthened their presence and outperformed peers in the
FMCG sector. On the contrary, Colgate Palmolive and Britannia Industries are strong in single product category
i.e. tooth pastes and Biscuits. In addition companies have been successful in reviving their presence in the semiurban and rural markets.
Beverages
India is amongst leading consumers of soft drinks in the Asia Pacific. Growth in the market has been mainly
spurred by investments made by foreign investors, according to ‘India Quarterly Beverage Tracker Report Q1
2013’.
The branded tea segment in India is valued at Rs 6,000 crore (US$ 961.59 million). With growing affluence of
Indian consumers, a few segments such as premium and organic coffee and green-herbal tea have created early
inroads into the market. Expecting fast growth in value-added dairy products such as milk, foreign entities have
started looking at India as a dairy product market. Packaged milk segment in India is projected to grow from US$
7.76 billion to US$ 32.9 billion by 2030, registering an annual growth of 8 per cent.
India could emerge as a top five market for the Coca Cola Company by 2020," according to Mr Ahmet C Bozer,
International President, Coca Cola. Rasna expects revenues worth Rs 500 crore (US$ 80.13 million) in the next
three years from the ready-to-drink beverage segment, with launching four variants of juices.
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale
of any financial instrument or as an official confirmation of any transaction. The information contained herein is
from publicly available data or other sources believed to be reliable but do not represent that it is accurate or
complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. This document is provide for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision.
Firstcall India Equity Research: Email – info@firstcallindia.com
C.V.S.L.Kameswari
Pharma
U. Janaki Rao
Capital Goods
B. Anil Kumar
Diversified
Ashish.Kushwaha
IT, Consumer Durable & Banking
Suhani Adilabadkar
Diversified
M. Vinayak Rao
Diversified
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