Hindustan Unilever (HUL) is the biggest FMCG company in India with over 40 brands across categories. It reported revenue of Rs. 15,597 crores in Q3FY23, up 16% YoY. Key risks include sharp increases in input prices and slow rural demand. The company has a strong financial position with no debt and healthy cash reserves.
Hindustan Unilever (HUL) is the biggest FMCG company in India with over 40 brands across categories. It reported revenue of Rs. 15,597 crores in Q3FY23, up 16% YoY. Key risks include sharp increases in input prices and slow rural demand. The company has a strong financial position with no debt and healthy cash reserves.
Hindustan Unilever (HUL) is the biggest FMCG company in India with over 40 brands across categories. It reported revenue of Rs. 15,597 crores in Q3FY23, up 16% YoY. Key risks include sharp increases in input prices and slow rural demand. The company has a strong financial position with no debt and healthy cash reserves.
Hindustan Unilever (HUL) is the biggest FMCG company in India with over 40 brands across categories. It reported revenue of Rs. 15,597 crores in Q3FY23, up 16% YoY. Key risks include sharp increases in input prices and slow rural demand. The company has a strong financial position with no debt and healthy cash reserves.
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About The Stock
Hindustan Unilever (HUL) is the biggest FMCG company in India with more than 40 brands across categories. It is the market leader in fabric wash, personal wash, cosmetics, shampoos and many other categories.
The company has a distribution reach of ~8.0 million (mn) outlets with a direct network of more than 3.5 mn HUL acquired GSK Consumer Healthcare’s business in 2019 and integrated Horlicks and Boost brands with the foods & refreshment segment Particulars Particulars (₹ crore) Amount Market Capitalization 582,263.9 Cash & Investments (FY21) 7,004.0 EV 540,406.0 52 week H/L (₹) 2,769.7/2,407.8 Equity Capital 235.0 Face Value (₹) 1.0 Shareholding pattern (in %) Dec 22Mar 23Jun 23Sep 23 Promoters 61.961.961.961.9 FII 14.314.414.513.9 DII 4.04.34.64.8 Others 19.819.519.119.4
Key Financial Summary
Key Financials FY19 FY20 FY21 5 year CA
Total Operating Income 38,734.0 38,785.0 45,996.0
EBITDA 9,147.0 9,600.0 11,324.0
EBITDA Margin % 23.6 24.8 24.6
Net Profit 6,546.0 6,738.0 7,954.5
EPS (|) 30.3 31.2 33.9
P/E 76.9 74.7 68.8
RoNW % 87.6 85.7 17.1
RoCE (%) 90.7 89.5 18.9
Result Highlights of Q2FY24
• HUL reported revenue of INR 1,56,230 Mn, reporting a muted growth of 3.2% YoY/ 0.8% QoQ. Underlying volume growth was
2.0% YoY. For H1FY24, revenue growth was at 4.5% YoY, taking the revenue to INR 3,11,190 Mn.
• EBITDA was INR 37,970 Mn, up 9.1% YoY/ 3.6% QoQ. EBITDA margin expanded by 133 bps YoY/ 65 bps QoQ to 24.3%. For H1FY24, EBITDA grew by 8.4% YoY to INR 74,620 Mn & EBITDA margin expanded by 86 bps YoY to 24.0%.
• Net profit was INR 26,560 Mn, which was flat (-0.3%) YoY and grew by 4.0% QoQ. Adj. PAT grew by 9.3% YoY/ 2.7% QoQ to INR
26,610 Mn. For H1FY24, PAT grew by 3.3% YoY to INR 52,100 Mn while Adj. PAT grew by 8.8% YoY to INR 52,520 Mn. Key Risk:
(i) Sharp correction in crude may perk up margin higher than our estimate (ii) Continued dismal rural demand (iii) Slowdown in the demand environment: Any slowdown in demand (especially in rural India) would affect sales of key categories, resulting in moderation of sales volume growth. (iv) Increased input prices: Palm oil and crude derivatives such as linear alkyl benzene are some of the key raw materials used by HUL. Any significant increase in the prices of some of these raw materials would affect profitability and earnings growth. (v) Increased competition in highly penetrated categories: Increased competition in highly penetrated categories such as soaps and detergents would act as a threat to revenue growth.
Recommendation Rationale
HUL is the largest FMCG company in India with market leadership across product segments. More than 75% of its business is winning both value and volume market shares
Q3FY23 – HUL posted overall revenue of Rs.15,597 crs, an increase of 16% YoY in Q3FY23, supported by increased volume growth (5% YoY), significantly outperforming the market.
New Royalty Structure – Management has approved new royalty and central services arrangement fee structure that involves an increase from 2.65% to 3.45% (+80bps) of the turnover.
Financial Performance – The company is financially strong with zero debt and healthy cash & equivalents of Rs. 7490 crs. It has a good return on equity (ROE) track record with 5 Year avg. RoE of 30%+. The company also pays a healthy dividend for the investors consistently. The operating cash flow of the company has grown at a 12% CAGR for the period between FY17-22.
Key Triggers for future price performance
Synergistic benefits of integration of nutrition business (Horlicks & Boost) to drive cost rationalisation Long term premiumisation trend in fabric wash to help sustain margins Steep commodity inflation to continue to drive pricing growth but keep margins under check In major categories, highest market share gains in more than a decade
