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Hindustan Unilever
Strong outperformance; raise
estimates and PO
�� 13% quarter beat; hike PO to Rs420
HUL reported a strong Q2 with 13% PAT beat despite commodity inflation. Post
this we have upped estimates 4% to 7% to bake in higher revenue/margins and
we are 3% ahead of consensus led by this. We raise PO to Rs420 (earlier PO
Rs360) based on a target of 27x 1yr fwd PE and bakes in ~5% re-rating vs five
yr historical average. It is at 15% premium to ITC’s target PE- justified given
HUL’s higher RoE and converging growth rates.
Across the board growth; soaps & detergents surprise
While HUL reported strong growth across segments, Soaps & detergents
surprised positively with 22% revenue growth led by price hikes. Personal
products (+18%yoy), beverages (+15%yoy) and processed foods (+21% yoy)
growth was led by a mix of price and volume increases. EBITDA margins
improved 116bp despite 348bp higher raw material costs led by (1) rationalized
A&P spends in soaps & detergents and (2) operating leverage.
Strong volume growth to continue as drivers intact
HUL’s strong volume performance in Q2 was led by (1) growth in modern trade,
(2) increased rural reach and (3) product innovations. We expect volume growth
to sustain at ~10% level in the medium term led by these factors and also given
HUL’s strong internal focus on profitable volume increase.
Reiterate Buy; upside pot’l to estimates
We reiterate Buy on HUL with increased PO of Rs420. Our PO assumes ~5% rerating
vs historical average multiple- justified given robust volume uptick, over 90%
RoE and 18% EPS CAGR.We see upside potential to estimates led by strong
correction in commodity prices. Key risks: i) competitive intensity can drive HUL to up
A&P spends and ii) sustained commodity inflation can pressure margins.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindustan Unilever
Strong outperformance; raise
estimates and PO
�� 13% quarter beat; hike PO to Rs420
HUL reported a strong Q2 with 13% PAT beat despite commodity inflation. Post
this we have upped estimates 4% to 7% to bake in higher revenue/margins and
we are 3% ahead of consensus led by this. We raise PO to Rs420 (earlier PO
Rs360) based on a target of 27x 1yr fwd PE and bakes in ~5% re-rating vs five
yr historical average. It is at 15% premium to ITC’s target PE- justified given
HUL’s higher RoE and converging growth rates.
Across the board growth; soaps & detergents surprise
While HUL reported strong growth across segments, Soaps & detergents
surprised positively with 22% revenue growth led by price hikes. Personal
products (+18%yoy), beverages (+15%yoy) and processed foods (+21% yoy)
growth was led by a mix of price and volume increases. EBITDA margins
improved 116bp despite 348bp higher raw material costs led by (1) rationalized
A&P spends in soaps & detergents and (2) operating leverage.
Strong volume growth to continue as drivers intact
HUL’s strong volume performance in Q2 was led by (1) growth in modern trade,
(2) increased rural reach and (3) product innovations. We expect volume growth
to sustain at ~10% level in the medium term led by these factors and also given
HUL’s strong internal focus on profitable volume increase.
Reiterate Buy; upside pot’l to estimates
We reiterate Buy on HUL with increased PO of Rs420. Our PO assumes ~5% rerating
vs historical average multiple- justified given robust volume uptick, over 90%
RoE and 18% EPS CAGR.We see upside potential to estimates led by strong
correction in commodity prices. Key risks: i) competitive intensity can drive HUL to up
A&P spends and ii) sustained commodity inflation can pressure margins.
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