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REDUCE
CMP: Rs 306 Target Price: Rs 275
n HUL reported spectacular volume growth of 14% in Q211, back of 11% in Q111 and Q410
n Q211 performance stood marginally ahead of expectation – revenue growth 9.7% yoy to Rs42.8 bn and APAT decline of 5.2% yoy to Rs5.2 bn
n Q211 performance for key segments on expected lines, except personal products that recorded 330 bps yoy and 180 bps qoq reduction in EBIT margins
n Absence of strong earnings upgrade catalysts and recent stock performance – downgrade HUL from ‘HOLD’ to ‘REDUCE’ with revised target price of Rs275/Share
Volume growth momentum continues, Q211 performance marginally
ahead of estimates
With aggressive A&P spends (undertaken in preceding quarters) and selective relaunch
and re-positioning of key brands – volume growth momentum continues in Q211
and springs positive surprise. HUL recorded spectacular volume growth of 14% in
Q211, back of 11% in Q111 and Q410. Consequently, Q211 performance stood
marginally ahead of estimates – (1) revenue growth of 9.7% yoy to Rs42.8 bn (2) Ebidta
(including other income) growth of 4.9% yoy to Rs7.2 bn and (3) APAT decline of 5.2%
yoy to Rs5.2 bn.
Q211 performance for key segments on expected lines, except Personal
Products
Q211 performance of key segments was on expected lines, except Personal Products
which recorded 330 bps yoy and 180 bps qoq reduction in EBIT margins. Healthy
revenue traction was witnessed in Personal Products, Beverages and Processed
Foods, whereas Soaps N Detergents performance influenced by price-reduction.
§ Revenue in Soaps & Detergent decline by 3.7% yoy to Rs21.3 bn & EBIT down
8.3% yoy to Rs2.5 bn
§ Revenue in Personal Product grew by 11.4% yoy to Rs13.7 bn & EBIT grew by
0.2% yoy to Rs3.1 bn
§ Revenue in Beverages grew by 14.1% yoy to Rs5.7 bn & EBIT down by 1.3% yoy
to Rs876 mn
§ Revenues in Processed Foods grew by 27.5% yoy to Rs2.2 bn & EBIT at Rs100
mn.
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