Hindustan Unilever's Q1FY19 results (Outperformer) - Superior quality of earnings!
Q1FY19 result highlights
- Revenues increased by 11% yoy at Rs93.5bn (est: Rs92.6bn), EBITDA increased by 22% yoy at Rs21bn (est: Rs20bn), EBITDA (incl other op income) increased by 21% yoy to Rs22.5bn (est: Rs21.4bn) and Adjusted PAT increased by 21% yoy at Rs15.7bn (est:Rs14.9bn)
- Comparable domestic consumer business sales were up 16% yoy with a volume growth of 12% (est: 12%) for the quarter.
- Home care sales grew by 20%; Personal care and Foods & Refreshment segment grew by 14% each respectively.
- Reported gross margins improved 300bps yoy(up 130bps qoq) led by mix, pricing & strong savings program. Advertising spends increased by 27% yoy, however, staff cost was up 5.5% yoy and other expenses increased by 1.8% yoy. Resultant operational EBITDA increased by 21% yoy with a margin expansion of 180bps yoy (120bps qoq). On comparable basis, EBITDA margins were up by 100bps yoy.
- Other income increased by 19% yoy. Adjusting for provision of Rs590m towards restructuring, PAT increased by 21% yoy.
Key positives: Strong domestic volume growth.
Key negatives: EBIT margin contraction in Personal care segment
Impact on financials: We have increased our FY19/20E earnings estimate by 2%/3% and introduced FY21E earnings estimate.
Valuations & view
HUL has delivered a fifth consecutive quarter of in line or ahead of estimate earnings growth. As demand continues to improve, we expect HUL to deliver an 8.5% volume CAGR over FY18-21E. We believe modest inflation is a positive EBITDA driver for HUL as it will enable the company to utilize scale and product diversification optimally and product price increases will be an operating leverage driver. Factoring the improving macro and HUL’s continued excellence in execution, our 4 year earnings CAGR of 19.3% is the highest 4 year earnings CAGR in the last 15 years (for any set of 4 years) for the company. Though valuations are rich at 52x/44x FY20/21E, we believe there is room for further earnings upgrades as rural demand recovers and HUL looks to extract more from supply chain efficiencies. We value HUL at a 30% premium to the India FMCG basket (ex-ITC) average; Maintain Outperformer.
Hindustan Unilever is predominantly engaged in manufacturing and distributing consumer products mainly in India. Co. operates five main business segments: Soaps and Detergents include soaps, detergent bars, detergent powders, detergent liquids, scourers, etc.; Personal Products include products in the categories of Oral Care, Skin Care (excluding soaps), Hair Care, Deodorants,Talcum Powder, Colour Cosmetics, Ayush services; Beverages include tea and coffee; Package Foods include Branded Staples (Atta, Salt, Bread, etc.), Culinary Products (tomato based products, fruit based products, soups, etc.) and Frozen desserts; Others include Exports, Chemicals, Water business, Infant Care Products.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.