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HUVR 1QFY12 was in line with forecasts. Overall volume growth at 9% given the high base is
impressive, with its personal products growing even higher at 19%. While second successive
quarter of positive EBITDA growth is a positive, recent outperformance of stock would restrian
further near-term upside to the stock.
Volume growth remain impressive in 1QFY12 at 9%
HUVR recorded a revenue growth of 14.8% which was driven by a volume growth of 9%. The
soaps & detergents business recorded a growth of 12.8%, the personal products business
grew at 19.4%, beverages at 13%, and packaged foods at 18%.
The volume growth in the personal products business was impressive at 19%, and now
contributes 30% to HUVR's overall revenues. Skin Care grew strongly across the portfolio led
by innovations. All the key brands continued to deliver strong double digit growth. "Fair &
Lovely" grew strongly aided by the launch of FAL Multi Vitamin Face Wash. Hair and Oral
care portfolio also delivered double digit growth.
However, we estimate that the volume growth in the soaps business was limited in 1QFY12,
as a consequence of the price hikes which were induced by the rising commodity prices.
However, the detergents business grew well across brands, with the mid-price brand "Rin"
recording it 6th consecutive quarter of double digit volume growth.
EBITDA growth at 10.8% was inline with expectations
HUVR recorded a EBITDA margin of 13.5% which was 50bps lower on a y.o.y basis. While,
the raw material cost to sales rose by 480bps y.o.y, and 160bps on a q.o.q basis, the 420bps
reduction in advertisement expenses to net sales balanced the impact on overall EBITDA
margins.
We believe, HUVR advertisement expenses to net sales have normalised to more sustainable
levels from fairly elevated levels in the 1HFY11. In 1QFY12, while it has increased its
advertisement spends in personal products and foods business, it reduced spends in soaps &
detergents business tracking competitors.
We forecast a full year EBITDA margin of 14.4% as we expect y.o.y margin expansion from
2QFY11 onwards, as full impact of the pricing actions, and the recent drop in palm oil prices
to favourably impact margins. However, we see limited upside scope for our FY12 EBITDA
estimates after these results, would wait for management commentary to adjust numbers if
necessary.
Remain positive, but Buy only at declines.
HUVR has risen by 16% from the Q4FY11 results, while outperforming the BSE Sensex by
20%, largely pricing in the turnaround to positive EBITDA growth. The raw material prices
remain elevated generally, but there has been some softening in the prices of crude palm oil
from the highs in Q4FY11. Sustained moderation in raw material prices is critical for margin
expansion in HUVR, and at this prices remain largely elevated with only moderate declines.
With limited catalyst to upgrade our target price of Rs337, we would recommend buying the
stocks only at declines. We await for details from the management call tommorrow.
Stock trades at 28x FY12 earnings,
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HUVR 1QFY12 was in line with forecasts. Overall volume growth at 9% given the high base is
impressive, with its personal products growing even higher at 19%. While second successive
quarter of positive EBITDA growth is a positive, recent outperformance of stock would restrian
further near-term upside to the stock.
Volume growth remain impressive in 1QFY12 at 9%
HUVR recorded a revenue growth of 14.8% which was driven by a volume growth of 9%. The
soaps & detergents business recorded a growth of 12.8%, the personal products business
grew at 19.4%, beverages at 13%, and packaged foods at 18%.
The volume growth in the personal products business was impressive at 19%, and now
contributes 30% to HUVR's overall revenues. Skin Care grew strongly across the portfolio led
by innovations. All the key brands continued to deliver strong double digit growth. "Fair &
Lovely" grew strongly aided by the launch of FAL Multi Vitamin Face Wash. Hair and Oral
care portfolio also delivered double digit growth.
However, we estimate that the volume growth in the soaps business was limited in 1QFY12,
as a consequence of the price hikes which were induced by the rising commodity prices.
However, the detergents business grew well across brands, with the mid-price brand "Rin"
recording it 6th consecutive quarter of double digit volume growth.
EBITDA growth at 10.8% was inline with expectations
HUVR recorded a EBITDA margin of 13.5% which was 50bps lower on a y.o.y basis. While,
the raw material cost to sales rose by 480bps y.o.y, and 160bps on a q.o.q basis, the 420bps
reduction in advertisement expenses to net sales balanced the impact on overall EBITDA
margins.
We believe, HUVR advertisement expenses to net sales have normalised to more sustainable
levels from fairly elevated levels in the 1HFY11. In 1QFY12, while it has increased its
advertisement spends in personal products and foods business, it reduced spends in soaps &
detergents business tracking competitors.
We forecast a full year EBITDA margin of 14.4% as we expect y.o.y margin expansion from
2QFY11 onwards, as full impact of the pricing actions, and the recent drop in palm oil prices
to favourably impact margins. However, we see limited upside scope for our FY12 EBITDA
estimates after these results, would wait for management commentary to adjust numbers if
necessary.
Remain positive, but Buy only at declines.
HUVR has risen by 16% from the Q4FY11 results, while outperforming the BSE Sensex by
20%, largely pricing in the turnaround to positive EBITDA growth. The raw material prices
remain elevated generally, but there has been some softening in the prices of crude palm oil
from the highs in Q4FY11. Sustained moderation in raw material prices is critical for margin
expansion in HUVR, and at this prices remain largely elevated with only moderate declines.
With limited catalyst to upgrade our target price of Rs337, we would recommend buying the
stocks only at declines. We await for details from the management call tommorrow.
Stock trades at 28x FY12 earnings,
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