Hindustan Unilever - Q1FY21 First Cut - ICICI Securities

(CMP - Rs. 2318; MCap - Rs. 5,45,000 crore)

Hindustan Unilever's (HUL) Q1FY21 numbers were above our estimates on the revenue front and in line with our estimates on the operating profits & earnings front.

Q1FY21 Earnings Summary

- Net sales increased by 4.4% YoY to Rs. 10,560 crore (I Direct estimate: Rs. 9873 crore) with volume decline (excluding Horlicks & Boost) of 7%. The company witnessed 6% growth in 80% of its product portfolio where some of the discretionary categories like ice-creams, cosmetics & water business were severely impacted by lockdown in April-May 2020. Home care segment revenue witnessed 2.1% decline whereas Beauty & Personal care (BPC) segment saw a 12% decline during the quarter. Foods segment grew by 51.7% after consolidating the acquired GSK brands (Horlicks, boost)

- Operating profit was flat at Rs. 2644 crore (I Direct estimate : Rs. 2618 crore) whereas operating margins contracted by 113 bps YoY to 25% with gross margins shrinkage of 222 bps, employee spend increased by 114 bps & other overhead expense increased by 171 bps due to negative operating leverage. The increase in spends were partially offset of 393 bps dip in A&P spend.

- Led by stable operating profit & dip in income tax, PAT increased by 7.2% to Rs. 1881 crore (I Direct estimate : Rs. 1893 crore). The company has declared special dividend of Rs. 9.5 / share.

HUL has grown at 6% on 80% of its portfolio (health & hygiene) with soaps & sanitizers growing at a faster pace given increased awareness about personal & home hygiene. Moreover, tea & coffee business seen a double digit growth with increased in-home consumption. On the other hand ice-creams, cosmetics & water business were negatively impacted during the quarter. We believe the company has been able to refill the inventory at the distributor level at the end of June 2020 given manufacturing & supply chain operations recouping back to normal. We believe soaps, sanitizers and home care products would continue to grow at a strong pace given per capita consumption of hygiene products can increase multifold. However, localized lockdowns would continue to impact supply in Q2FY21 as well.

We will be releasing a detailed update post the conference call.

Shares of HINDUSTAN UNILEVER LTD. was last trading in BSE at Rs.2319.1 as compared to the previous close of Rs. 2330.35. The total number of shares traded during the day was 117262 in over 6661 trades.

The stock hit an intraday high of Rs. 2350 and intraday low of 2308.65. The net turnover during the day was Rs. 272682050.

Source : Equity Bulls

Keywords