Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

Hindustan Unilever - Volume focus over margins continues - ICICI Securities

Posted On: 2021-01-27 22:46:49 (Time Zone: Arizona, USA)

Strong double-digit growth in health, hygiene and nutrition portfolio was encouraging to note in 3QFY21. However, underlying volume growth of 4% (JYL reported 15% volume growth on the same day) was a tad underwhelming. We note that this underperformance could reduce given HUL's focus on volume growth even at the expense of gross margins in the near-term (see report). We like the (1) increase in consumer-relevant innovation intensity for hygiene related products (and more), (2) double-digit growth in nutrition business (albeit potentially at lower margins), (3) increase in assortment & outlet coverage (back to pre-Covid levels) and (4) continuing plans to gain market share in tea from unorganised players by partially absorbing input cost inflation. Maintain ADD.

We note that 3Q results missed comments on profitability of Nutrition business (was mentioned in 1Q and 2Q) - a potential risk to margins given Foods & Refreshment margins down 380bps YoY.

- Overall revenue performance improved: Reported revenue / EBITDA / recurring PAT grew 20% / 17% / 15%. Underlying domestic consumer business revenue (excluding merger of GSK CH and VWash) grew 7% with 4% volume growth (UVG). Health, Hygiene and Nutrition (80% of company portfolio) witnessed 10% revenue growth. On the other side, discretionary segments of Skin care, Deos and Colour cosmetics (15% revenue contribution) and out of home consumption businesses like water, ice-creams, food solutions and vending (5% revenue contribution) declined 1% and 15% respectively.

- Gross margin impacted due to commodity headwinds: Gross margin declined 25bps to 54% due to an inflationary trend in input costs which was largely offset by price hikes and better product mix. HUL continued with the strategy to not pass on the steep inflation completely through price hikes in order to gain market shares. It continues to believe that if it can retain and recruit new consumers, margin expansion can be achieved over time.

- Cost savings, lower ad-spends limit operating margin decline: Reported EBITDA margin declined 90bps YoY to 24.1% due to higher other operating expenses (+70bps YoY) - increased investment in GTM strategy to capture demand when it revives, investment in packaged foods and future capabilities.

- Valuation and risks: We cut our earnings estimates by ~2%; modelling revenue / EBITDA / PAT CAGR of 15 / 16 / 15 (%) over FY2020-23E. Maintain ADD rating with DCF-based target price unchanged at Rs2,600. Key downside risks are delayed recovery in demand and irrational competition.

Shares of HINDUSTAN UNILEVER LTD. was last trading in BSE at Rs.2390.75 as compared to the previous close of Rs. 2398.9. The total number of shares traded during the day was 137939 in over 6537 trades.

The stock hit an intraday high of Rs. 2421 and intraday low of 2334.85. The net turnover during the day was Rs. 326030619.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Warehousing demand expected to grow around 160% to reach 35 million sq. ft in 2021: JLL

Telecom - Spectrum auction: Prudent investment by Bharti Airtel - ICICI Securities

JB Chemicals & Pharmaceuticals - Analyst meet takeaways - ICICI Securities

IPO Review - MTAR Technologies Ltd - ICICI Direct

Auto Sector - Monthly Volume Round-up - Feb 21 - Decent YoY Growth Continues

Aditya Birla Fashion and Retail - Focus on scaling up new businesses - ICICI Securities

Automobiles (wholesale) - Wholesales push continues despite modest retail trends - ICICI Securities

Aditya Birla Capital - Thoughtful (inclusive) conglomerate business evolution commands premium - ICICI Securities

Jubilant Foodworks - Buying in-the-money options - ICICI Securities

Multi Commodity Exchange of India - Play on rising commodity prices? - ICICI Securities

Gladiator Stocks - Sudarshan Chemical - ICICI Direct

Monthly Commodities Outlook - March 2021 - ICICI Direct

ICICI Direct - Monthly Currency Outlook: Rupee to depreciate further towards 75.00 level...

ICICI Direct - Covid Recovery Pulse - E-way bill generation in February 2021 starts on strong note...

Company Update - Virtual JLR Investor Event - Tata Motors - ICICI Direct

Analyst Meet Update - Aditya Birla Fashion and Retail - ICICI Direct

MTAR Technologies Ltd. - IPO - Huge Opportunities from Clean Energy Bodes Well - Reliance Research

ICICI Direct Derivatives Weekly View (February 26): Failure to move above 14700 may extend declines towards 14300...

Bank: Sector Credit Trends - Slows, Yet again - HDFC Securities

Piramal Enterprises - Pharma day highlights - ICICI Securities

Polymer price tracker - PVC prices rise sharply again! - ICICI Securities

Greenply Industries - Growth returns, at an inflection point - ICICI Securities

Tata Motors - JLR future proofing itself with rapid electric transition - ICICI Securities

Dairy - Higher freight cost and increase in Global SMP prices - ICICI Securities

Analyst Meet Update - Nestlé India (Hold): Focus on product innovation, expanding rural reach - ICICI Direct

MTAR Technologies Ltd - A strong player in booming high precision engineering... - Geojit

Rollover Report for February - March 2021 : Angel Broking

Reaction from industry experts on Q3FY21 GDP numbers

M. Govinda Rao, Chief Economic Adviser, Brickwork ratings on Q3FY21 GDP numbers

Mr. Dhiraj Relli, MD & CEO, HDFC securities views on Q3FY21 GDP Growth Number

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on Q3FY21 GDP

Rollover Analysis - Feb 21, 2021 - YES Securities

Consumer Durables - Demand-driven recovery continues - HDFC Securities

Cement - Demand surprises; earnings upgrade to continue - ICICI Securities

Gladiator Stocks - TeamLease Services - ICICI Direct

Gladiator Stocks - Metals to outshine post multi-year breakout... - ICICI Direct

Company Update - Sundaram Finance - ICICI Direct

Indian pharmaceutical industry to meet an ambition of US$130 billion by 2030 through innovation-led growth: EY-FICCI report

4th Industrial Conclave - Bullish undertone, favourable valuation - HDFC Securities

Sanofi India - Weak quarter; sequential improvement - ICICI Securities

Sunteck Realty - All eyes on upcoming launches - ICICI Securities

Company Update - Tata Motors - ICICI Direct

Q4CY20 Company Update - Mahindra CIE Automotive - ICICI Direct

Event Update - Hindalco - ICICI Direct

EY report launch at BioAsia 2021 - Moving the needle: Healthcare industry in a post-COVID world

Initiating Coverage - Dalmia Bharat Ltd - HDFC Securities Retail Research Desk

Initiating Coverage - Mastek Ltd - HDFC Securities Retail Research Desk

Hindalco Industries - Status quo maintained - ICICI Securities

Tata Motors - India business scaling in the right direction - ICICI Securities

IPO Review - Heranba Industries Ltd

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020