Hindustan Unilever
In Line at Operational Level
Quick Comment – Results In Line at Operational
Level: HUL reported revenue, operating profit and
adjusted profit growth of 12.5%, 16.6% and 17.7%,
respectively, compared with our expectations of 9.2%,
16.2% and 13.9%. Domestic FMCG revenue growth of
13% was driven by 13% growth in HPC and 15% growth
in the foods segment. 1) Key positive is relatively strong
volume growth of 6% vs. MSe 4-5%, whilst the key
negative is continuing sluggish revenue growth and
operating profit trends in the PP segment. 2) The gross
margin and EBITDA margin improved by 125bps and
50bps (MSe EBITDA +100bps yoy), respectively.
Advertisement and promotion expenses increased
90bps, while other expenses decreased 60bps. 3) The
Board has proposed final dividend of Rs6/sh, implying
an F13 dividend of Rs18.50/sh (incl. special dividend
Rs8.50/sh). 4) The tax rate was +110bps (MSe
+330bps)
Key Positives: 1) Soaps & Detergent revenue grew by
12.6%, coming in 1% above estimates. Double-digit
volume growth was reported in ‘Dove’, ‘Lux’, ‘Lifebuoy’,
‘Rin’ and ‘Surf’. 2) The beverage business EBIT margin
(16.9%) was 170bps above our estimate, driven by the
Tea category viz. extended distribution, impactful
activation and continued market development. 3) Foods
business was profitable with a 3.8% margin (MSe 0%).
Key Negatives: 1) Personal product revenue (12.1%)
and margin (25.8%) reported were 5% and 40bps below
our estimates. HUL registered double-digit volume
growth in the Hair and Oral portfolios. 2) The Soaps &
Detergent EBIT margin came in at 12.0%, up 70bps yoy
but 30bps below our expectations.
Reiterate UW: Although we think the consumer industry
fundamentals are intact, HUL’s earnings upgrade cycle
has clearly peaked. Positives (input costs, benign
competition, share gains) are largely factored in and
now offset by a ~700bps rise in effective tax rate over
the next three years and a step increase in royalty
payments to Unilever. Thus, we project an F13-15
earnings CAGR of just 6% – the lowest in our coverage
universe, and, at an F15e P/E of 27x, we remain UW.
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In Line at Operational Level
Quick Comment – Results In Line at Operational
Level: HUL reported revenue, operating profit and
adjusted profit growth of 12.5%, 16.6% and 17.7%,
respectively, compared with our expectations of 9.2%,
16.2% and 13.9%. Domestic FMCG revenue growth of
13% was driven by 13% growth in HPC and 15% growth
in the foods segment. 1) Key positive is relatively strong
volume growth of 6% vs. MSe 4-5%, whilst the key
negative is continuing sluggish revenue growth and
operating profit trends in the PP segment. 2) The gross
margin and EBITDA margin improved by 125bps and
50bps (MSe EBITDA +100bps yoy), respectively.
Advertisement and promotion expenses increased
90bps, while other expenses decreased 60bps. 3) The
Board has proposed final dividend of Rs6/sh, implying
an F13 dividend of Rs18.50/sh (incl. special dividend
Rs8.50/sh). 4) The tax rate was +110bps (MSe
+330bps)
Key Positives: 1) Soaps & Detergent revenue grew by
12.6%, coming in 1% above estimates. Double-digit
volume growth was reported in ‘Dove’, ‘Lux’, ‘Lifebuoy’,
‘Rin’ and ‘Surf’. 2) The beverage business EBIT margin
(16.9%) was 170bps above our estimate, driven by the
Tea category viz. extended distribution, impactful
activation and continued market development. 3) Foods
business was profitable with a 3.8% margin (MSe 0%).
Key Negatives: 1) Personal product revenue (12.1%)
and margin (25.8%) reported were 5% and 40bps below
our estimates. HUL registered double-digit volume
growth in the Hair and Oral portfolios. 2) The Soaps &
Detergent EBIT margin came in at 12.0%, up 70bps yoy
but 30bps below our expectations.
Reiterate UW: Although we think the consumer industry
fundamentals are intact, HUL’s earnings upgrade cycle
has clearly peaked. Positives (input costs, benign
competition, share gains) are largely factored in and
now offset by a ~700bps rise in effective tax rate over
the next three years and a step increase in royalty
payments to Unilever. Thus, we project an F13-15
earnings CAGR of just 6% – the lowest in our coverage
universe, and, at an F15e P/E of 27x, we remain UW.
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