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Hindustan Unilever
n Volume growth beats estimate; market share gain in most categories
Hindustan Unilever’s (HUL) Q3FY11 revenue jumped 11.6% Y-o-Y to INR 50.27 bn and
core PAT declined 2.1% to INR 5.87 bn. Accelerated 13% volume growth in the quarter
(against a base of 4.5% volume growth in Q3FY10) is even better than in earlier quarters
where the company had advantage of a lower base. Market share has increased in most
of the categories.
n EBITDA margins below estimate following higher COGS, A&P
EBITDA declined 13.1% to INR 6.24 bn, while margins declined 353bps. COGS inflation
(up 216bps), higher other expenses (up 75bps) and advertising and sales promotion
(A&P) costs (up 73bps) contributed to margin contraction, which was partly offset by
lower staff expenses (down 11bps). Though A&P costs are up 73bps Y-o-Y, they are
down 90bps from peak levels. Margins in soaps and detergents slipped 572bps Y-o-Y to
7.7%, while margins in personal products slipped 313bps Y-o-Y to 28.8% as HUL
refrained from taking price increases.
n Focus on price increases, along with market share & product launches
HUL’s aggression on field has been recognized by competitors who have reduced
promotional spending, taken price increases and lost market share. Our channel checks
suggest that HUL has already increased the price of Lux soap and may follow it up with
~5-8 % hike in prices of other premium soap brands such as Dove and Pears and
fairness cream Fair & Lovely in February, which should support margins from Q4FY11
onwards.
n Outlook and valuations: Positive; maintain ‘BUY’
We were confident of HUL’s underlying business turnaround and prudent cost control. We
believe this momentum will continue in the coming quarters with increased focus on new
product launches, market share gain and judicious price increases in existing categories.
A&P expenses are lower by 90bps from recent peak levels and we expect A&P expenses
to moderate going forward. We maintain ‘BUY’ recommendation on it. On relative return
basis, the stock is rated ‘Sector Performer’ (refer ratings for details).
We will come out with a detailed note post conference call on January 27th 2011.
n Volume growth beats estimate; market share gain in most categories
Hindustan Unilever’s (HUL) Q3FY11 revenue jumped 11.6% Y-o-Y to INR 50.27 bn and
core PAT declined 2.1% to INR 5.87 bn. Accelerated 13% volume growth in the quarter
(against a base of 4.5% volume growth in Q3FY10) is even better than in earlier quarters
where the company had advantage of a lower base. Market share has increased in most
of the categories.
n EBITDA margins below estimate following higher COGS, A&P
EBITDA declined 13.1% to INR 6.24 bn, while margins declined 353bps. COGS inflation
(up 216bps), higher other expenses (up 75bps) and advertising and sales promotion
(A&P) costs (up 73bps) contributed to margin contraction, which was partly offset by
lower staff expenses (down 11bps). Though A&P costs are up 73bps Y-o-Y, they are
down 90bps from peak levels. Margins in soaps and detergents slipped 572bps Y-o-Y to
7.7%, while margins in personal products slipped 313bps Y-o-Y to 28.8% as HUL
refrained from taking price increases.
n Focus on price increases, along with market share & product launches
HUL’s aggression on field has been recognized by competitors who have reduced
promotional spending, taken price increases and lost market share. Our channel checks
suggest that HUL has already increased the price of Lux soap and may follow it up with
~5-8 % hike in prices of other premium soap brands such as Dove and Pears and
fairness cream Fair & Lovely in February, which should support margins from Q4FY11
onwards.
HUL is offering discounts in several of their brands for the Republic day sale period,
which will exhaust most of the existing stock. So products with the new price tag should
hit the market by February.
The country’s second-largest soap maker Godrej Consumer Products, which makes
Cint hol and Godrej No 1brands, too plans a price increase to deal with soaring raw
material prices, while Wipro Consumer Care, maker of Santoor soap, will wait a bit
before taking a decision.
n Soaps and detergents
Margins declined 572bps Y-o-Y following price cuts and promotional spending. Home and
Personal Care business grew by 11.6% with competitive growth in both Laundry and
Personal Wash. Laundry portfolio was further strengthened and Rin delivered record
volume growth. Personal Wash also grew ahead of the market with Lifebuoy growing
strongly post the relaunch and the premium portfolio continued to deliver robust growth
n Personal products (PP)
Margins declined 313bps Y-o-Y. Personal Products grew strongly at 20.2%; Growth was
broad based across categories with Skin Care delivering a particularly strong
performance. Skin Care growth was innovation led, both on the core and in emerging
segments. Fair and Lovely, Pond’ s White Beauty and Vaseline Healthy White continued to
deliver robust sales growth. Both Hair and Oral performed well across the key brands.
Dove Hair range was relaunched with ‘Fiber Actives’ and in Oral, a new variant Close-up
‘Fire-Freeze’ was successfully introduced.
Others
Foods business grew 11.3%. In Tea, Red Label was relaunched and continued to deliver
double digit growth. Coffee growth was robust, across conventional and instant coffee,
with price point packs performing particularly well. Knorr Soupy Noodles sustained its
strong momentum and is now available nationally. Ice-cream grew by 31% with good
growth across formats
Pureit continued to expand its franchise with product offerings across multiple price and
benefit positions. Overall, the water business grew strongly and in line with action
standards.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindustan Unilever
n Volume growth beats estimate; market share gain in most categories
Hindustan Unilever’s (HUL) Q3FY11 revenue jumped 11.6% Y-o-Y to INR 50.27 bn and
core PAT declined 2.1% to INR 5.87 bn. Accelerated 13% volume growth in the quarter
(against a base of 4.5% volume growth in Q3FY10) is even better than in earlier quarters
where the company had advantage of a lower base. Market share has increased in most
of the categories.
n EBITDA margins below estimate following higher COGS, A&P
EBITDA declined 13.1% to INR 6.24 bn, while margins declined 353bps. COGS inflation
(up 216bps), higher other expenses (up 75bps) and advertising and sales promotion
(A&P) costs (up 73bps) contributed to margin contraction, which was partly offset by
lower staff expenses (down 11bps). Though A&P costs are up 73bps Y-o-Y, they are
down 90bps from peak levels. Margins in soaps and detergents slipped 572bps Y-o-Y to
7.7%, while margins in personal products slipped 313bps Y-o-Y to 28.8% as HUL
refrained from taking price increases.
n Focus on price increases, along with market share & product launches
HUL’s aggression on field has been recognized by competitors who have reduced
promotional spending, taken price increases and lost market share. Our channel checks
suggest that HUL has already increased the price of Lux soap and may follow it up with
~5-8 % hike in prices of other premium soap brands such as Dove and Pears and
fairness cream Fair & Lovely in February, which should support margins from Q4FY11
onwards.
n Outlook and valuations: Positive; maintain ‘BUY’
We were confident of HUL’s underlying business turnaround and prudent cost control. We
believe this momentum will continue in the coming quarters with increased focus on new
product launches, market share gain and judicious price increases in existing categories.
A&P expenses are lower by 90bps from recent peak levels and we expect A&P expenses
to moderate going forward. We maintain ‘BUY’ recommendation on it. On relative return
basis, the stock is rated ‘Sector Performer’ (refer ratings for details).
We will come out with a detailed note post conference call on January 27th 2011.
n Volume growth beats estimate; market share gain in most categories
Hindustan Unilever’s (HUL) Q3FY11 revenue jumped 11.6% Y-o-Y to INR 50.27 bn and
core PAT declined 2.1% to INR 5.87 bn. Accelerated 13% volume growth in the quarter
(against a base of 4.5% volume growth in Q3FY10) is even better than in earlier quarters
where the company had advantage of a lower base. Market share has increased in most
of the categories.
n EBITDA margins below estimate following higher COGS, A&P
EBITDA declined 13.1% to INR 6.24 bn, while margins declined 353bps. COGS inflation
(up 216bps), higher other expenses (up 75bps) and advertising and sales promotion
(A&P) costs (up 73bps) contributed to margin contraction, which was partly offset by
lower staff expenses (down 11bps). Though A&P costs are up 73bps Y-o-Y, they are
down 90bps from peak levels. Margins in soaps and detergents slipped 572bps Y-o-Y to
7.7%, while margins in personal products slipped 313bps Y-o-Y to 28.8% as HUL
refrained from taking price increases.
n Focus on price increases, along with market share & product launches
HUL’s aggression on field has been recognized by competitors who have reduced
promotional spending, taken price increases and lost market share. Our channel checks
suggest that HUL has already increased the price of Lux soap and may follow it up with
~5-8 % hike in prices of other premium soap brands such as Dove and Pears and
fairness cream Fair & Lovely in February, which should support margins from Q4FY11
onwards.
HUL is offering discounts in several of their brands for the Republic day sale period,
which will exhaust most of the existing stock. So products with the new price tag should
hit the market by February.
The country’s second-largest soap maker Godrej Consumer Products, which makes
Cint hol and Godrej No 1brands, too plans a price increase to deal with soaring raw
material prices, while Wipro Consumer Care, maker of Santoor soap, will wait a bit
before taking a decision.
n Soaps and detergents
Margins declined 572bps Y-o-Y following price cuts and promotional spending. Home and
Personal Care business grew by 11.6% with competitive growth in both Laundry and
Personal Wash. Laundry portfolio was further strengthened and Rin delivered record
volume growth. Personal Wash also grew ahead of the market with Lifebuoy growing
strongly post the relaunch and the premium portfolio continued to deliver robust growth
n Personal products (PP)
Margins declined 313bps Y-o-Y. Personal Products grew strongly at 20.2%; Growth was
broad based across categories with Skin Care delivering a particularly strong
performance. Skin Care growth was innovation led, both on the core and in emerging
segments. Fair and Lovely, Pond’ s White Beauty and Vaseline Healthy White continued to
deliver robust sales growth. Both Hair and Oral performed well across the key brands.
Dove Hair range was relaunched with ‘Fiber Actives’ and in Oral, a new variant Close-up
‘Fire-Freeze’ was successfully introduced.
Others
Foods business grew 11.3%. In Tea, Red Label was relaunched and continued to deliver
double digit growth. Coffee growth was robust, across conventional and instant coffee,
with price point packs performing particularly well. Knorr Soupy Noodles sustained its
strong momentum and is now available nationally. Ice-cream grew by 31% with good
growth across formats
Pureit continued to expand its franchise with product offerings across multiple price and
benefit positions. Overall, the water business grew strongly and in line with action
standards.
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