Mr. Himanshu Nayyar, Lead Analyst - Institutional Equities, YES SECURITIES
HUL 2QFY21 results first cut - Resilient performance in a difficult environment; could restart another phase of outperformance
Result summary - Strong set of numbers led by better than expected growth in the foods and beverages business coupled with margin expansion despite commodity headwinds. Revenue/EBITDA/PAT growth of 16%/17%/10%, marginally ahead of estimates across all fronts.
Topline - Revenue growth of 16% yoy (3% yoy revenue and 1% yoy volume growth ex-GSK) with 70% of portfolio gaining market share and 80% of portfolio (Health, Hygiene and Nutrition) growing in double-digits; 20% discretionary portfolio also improved sequentially after a 45% fall in 1Q to a 25% decline in 2Q.
Margins - Gross margins reduced 150bps yoy to 53% given inferior mix and RM headwinds in tea and palm oil; while EBITDA margins improved 30bps to 25.1% mainly due to lower selling expenses.
Segmental performance - Home care down 2%, personal care flat and foods growth at higher than expected 83% (19% growth ex-GSK) led by double digit growth in tea, coffee and GSK portfolio; margins improved across segments led by strong cost controls especially ASP and timely pricing action especially in tea.
Earnings - PAT growth of 10% was lower than EBITDA growth of 17% given lower other income and lower tax rate in the base quarter.
Outlook- Rural growth is resilient and should sustain while urban growth looks uncertain although worst is behind, gross margins would remain under pressure due to inflationary commodity environment; management remains cautiously optimistic about demand growth going ahead.
Dividend - Rs14 per share interim dividend declared.
View - We expect the stock to react positively post this performance and would expect a gradual re-rating towards 50x FY23 earnings from 44x currently driving a 12-13% upside from current levels. HUL remains our top pick in the staples space in addition to Dabur, Nestle and Tata Consumer.
Shares of HINDUSTAN UNILEVER LTD. was last trading in BSE at Rs.2172.1 as compared to the previous close of Rs. 2178.8. The total number of shares traded during the day was 272156 in over 20222 trades.
The stock hit an intraday high of Rs. 2207 and intraday low of 2133. The net turnover during the day was Rs. 591372681.