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Hindustan Unilever (HLL.BO) Rs325.90
Equity Research
First Take: Sales in line, gross margins disappoint
News
Hindustan Unilever reported 1QFY12 sales of Rs55,039 mn (15% yoy, 1%
above our estimates) and PBT (before exceptional items) of Rs7,487 mn
(9% yoy, 1% below our estimates). PAT of Rs6,272 mn was 7% above our
estimates due to higher exceptional income from sale of properties. Key
highlights: 1) HUL reported 8.3% volume growth in 1QFY12, lower than
the double-digit volume growth reported in the past 5 quarters. 2) Gross
margins for the quarter were down 311 bp following increased raw
material prices. 3) EBITDA margins were down 45 bp as the company
reported lower than expected A&P spend (11.5% of sales vs 15.7% in
1QFY11) and lower other expenses. 4) Soaps and detergents margins were
down 175 bp yoy, while personal product margins improved by 53 bp. 5)
Revenues for the processed foods business (including ice-creams) were
below our estimates and margins were down 352 bp yoy.
Analysis
We believe that the volume growth trajectory for the company appears less
robust than in FY11 as the company faces a higher base and increased cost
pressure forcing cuts in A&P spends. We also believe that with increased
competition in several categories such as shampoos, soaps and
detergents, toothpastes and processed foods, we could see further
pressure on both volume growth and EBITDA margins.
Implications
We maintain our Sell rating and 12-m target price. We await further details
from the analyst call scheduled tomorrow (post-market)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindustan Unilever (HLL.BO) Rs325.90
Equity Research
First Take: Sales in line, gross margins disappoint
News
Hindustan Unilever reported 1QFY12 sales of Rs55,039 mn (15% yoy, 1%
above our estimates) and PBT (before exceptional items) of Rs7,487 mn
(9% yoy, 1% below our estimates). PAT of Rs6,272 mn was 7% above our
estimates due to higher exceptional income from sale of properties. Key
highlights: 1) HUL reported 8.3% volume growth in 1QFY12, lower than
the double-digit volume growth reported in the past 5 quarters. 2) Gross
margins for the quarter were down 311 bp following increased raw
material prices. 3) EBITDA margins were down 45 bp as the company
reported lower than expected A&P spend (11.5% of sales vs 15.7% in
1QFY11) and lower other expenses. 4) Soaps and detergents margins were
down 175 bp yoy, while personal product margins improved by 53 bp. 5)
Revenues for the processed foods business (including ice-creams) were
below our estimates and margins were down 352 bp yoy.
Analysis
We believe that the volume growth trajectory for the company appears less
robust than in FY11 as the company faces a higher base and increased cost
pressure forcing cuts in A&P spends. We also believe that with increased
competition in several categories such as shampoos, soaps and
detergents, toothpastes and processed foods, we could see further
pressure on both volume growth and EBITDA margins.
Implications
We maintain our Sell rating and 12-m target price. We await further details
from the analyst call scheduled tomorrow (post-market)
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