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Hindustan Unilever is a leading packaged food company in India with dominant
shares in tea and coffee segment. Besides these, it enjoys strong presence in sauces,
jams and soups categories. Its recent entry in instant noodles category has witnessed
good consumer response and management is working to scale this product in a
significant manner and challenge the dominance of Nestle here. While over the years
HUL has lagged peers in terms of innovation and new product introductions in
packaged foods space, over past few years we have seen renewed focus of
management to leverage on its strong distribution network and global franchise to
expand its revenue base.
Beverages and processed foods account for 12% and 5% of HUL's turnover
respectively. While revenue growth for beverages (largely tea) has been steady at 8-
10% (largely price led), packaged foods is growing at a healthy pace of 20-25% over
past year supported by new product introductions.
Hindustan Unilever (Underweight)
Our Sep’11 target price of Rs270 is based on 22x one year forward P/E which is at
10% discount to consumer sector average. Our target multiple is at 15% discount to
its average 3 year trading multiple which we believe is justified considering stiff
competitive environment leading to poor earnings growth visibility in near term.
Key risks to our PT are benign input cost environment, sharp recovery in volumes
and lower competitive intensity than expected.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindustan Unilever is a leading packaged food company in India with dominant
shares in tea and coffee segment. Besides these, it enjoys strong presence in sauces,
jams and soups categories. Its recent entry in instant noodles category has witnessed
good consumer response and management is working to scale this product in a
significant manner and challenge the dominance of Nestle here. While over the years
HUL has lagged peers in terms of innovation and new product introductions in
packaged foods space, over past few years we have seen renewed focus of
management to leverage on its strong distribution network and global franchise to
expand its revenue base.
Beverages and processed foods account for 12% and 5% of HUL's turnover
respectively. While revenue growth for beverages (largely tea) has been steady at 8-
10% (largely price led), packaged foods is growing at a healthy pace of 20-25% over
past year supported by new product introductions.
Hindustan Unilever (Underweight)
Our Sep’11 target price of Rs270 is based on 22x one year forward P/E which is at
10% discount to consumer sector average. Our target multiple is at 15% discount to
its average 3 year trading multiple which we believe is justified considering stiff
competitive environment leading to poor earnings growth visibility in near term.
Key risks to our PT are benign input cost environment, sharp recovery in volumes
and lower competitive intensity than expected.
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