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Hindustan Unilever (HLL.BO)
Hold: In Line 1QFY12 Results
11% Y/Y PAT growth – in line with expectations — 1QFY12 Recurring PAT of
Rs5.8bn was in line with our estimates. Operating EBITDA of Rs6.79bn (margin of
~12.3%, +50bps Q/Q, -20bps Y/Y) was slightly ahead of our estimates. Net revenues
increased ~15% Y/Y to Rs55bn.
Cost pressures: A balancing act — Gross margins of 44.1% were down ~5ppt Y/Y
and ~160bps Q/Q as HUVR was impacted by costs like CPO, PFAD, et al. This was
mitigated by a sharp cutback in A&P spends (-16% Y/Y, much lower than our
estimates) as mgmt noted that reduction in competitive intensity in segments like soaps
and detergents resulted in scale-back of promotional activity (though competitive
intensity remains elevated in personal products and foods).
Volume growth moderates — Volume growth tapered off to ~8%, in line with mgmt’s
earlier assessment that FY12 revenue growth will be a more balanced mix of price/
volumes. We note that going forward, volume growth could continue to decelerate,
given the base effect – and benefits of the enhanced distribution initiatives are also
baked in the base. We await details in tomorrow’s call on market share dynamics and
mgmt’s strategy as it strives to grow in a competitive manner, while navigating through
a volatile commodity environment.
Personal products revenue growth encouraging — PP revenue growth was a
healthy 19% Y/Y, though this was a low base Q (recall in 1QFY11 PP revenues rose
~11%, impacted by lower hair care). PP remains at ~29% of revenues, in line with past
trends. Segmental margins at ~25% are also steady, though next Q a challenging base
will render a difficult Y/Y comp, coupled with the fact that intensity remains high in
segments like oral and hair.
Hold; Target Price of Rs330— We make minor adjustments to earnings estimates
(<1% over FY12-13E) and roll forward our target price to Mar13E P/E from Sept12E
earlier, maintaining our 25x target P/E multiple. Maintain Hold.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindustan Unilever (HLL.BO)
Hold: In Line 1QFY12 Results
11% Y/Y PAT growth – in line with expectations — 1QFY12 Recurring PAT of
Rs5.8bn was in line with our estimates. Operating EBITDA of Rs6.79bn (margin of
~12.3%, +50bps Q/Q, -20bps Y/Y) was slightly ahead of our estimates. Net revenues
increased ~15% Y/Y to Rs55bn.
Cost pressures: A balancing act — Gross margins of 44.1% were down ~5ppt Y/Y
and ~160bps Q/Q as HUVR was impacted by costs like CPO, PFAD, et al. This was
mitigated by a sharp cutback in A&P spends (-16% Y/Y, much lower than our
estimates) as mgmt noted that reduction in competitive intensity in segments like soaps
and detergents resulted in scale-back of promotional activity (though competitive
intensity remains elevated in personal products and foods).
Volume growth moderates — Volume growth tapered off to ~8%, in line with mgmt’s
earlier assessment that FY12 revenue growth will be a more balanced mix of price/
volumes. We note that going forward, volume growth could continue to decelerate,
given the base effect – and benefits of the enhanced distribution initiatives are also
baked in the base. We await details in tomorrow’s call on market share dynamics and
mgmt’s strategy as it strives to grow in a competitive manner, while navigating through
a volatile commodity environment.
Personal products revenue growth encouraging — PP revenue growth was a
healthy 19% Y/Y, though this was a low base Q (recall in 1QFY11 PP revenues rose
~11%, impacted by lower hair care). PP remains at ~29% of revenues, in line with past
trends. Segmental margins at ~25% are also steady, though next Q a challenging base
will render a difficult Y/Y comp, coupled with the fact that intensity remains high in
segments like oral and hair.
Hold; Target Price of Rs330— We make minor adjustments to earnings estimates
(<1% over FY12-13E) and roll forward our target price to Mar13E P/E from Sept12E
earlier, maintaining our 25x target P/E multiple. Maintain Hold.
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