MOSL: HINDUSTAN UNILEVER (Buy)-Outlook buoyant-entry point attractive post recent correction
HINDUSTAN UNILEVER: Outlook buoyant; entry point attractive post recent correction
(HUVR IN, Mkt Cap USD47.9b, CMP INR1604, TP INR2025, 26% Upside, Buy)
We spoke to the management of Hindustan Unilever (HUL) for an update on overall market conditions. Below are the key takeaways from our discussion:
Demand environment stable
- 2QFY19 has seen stable market demand, continuing through 1QFY19. Rural continues to grow ahead of urban (but has still not accelerated to the pace seen a few years ago vis-à-vis urban growth). Rural volumes are now growing at 1.5x of urban while value is at 1.3x of urban.
- Floods in Kerala and transport strike during the quarter did not have any major impact and was well managed.
- Channel pipelines are now normal. Modern trade continues growing ahead of general trade, which is positive for premiumization.
- Management stated that two-year CAGR on volumes should be in the range of 6-8%, going forward, which augurs well for growth in subsequent quarters.
Price hike and cost savings to mitigate Inflation and high-ad spends
- Crude and currency are playing an active role in driving up inflation in the home care product portfolio. In the personal care portfolio, oil costs have remained benign. Crude is also having some impact on the packaging costs.
- HUL has taken a price hike of 3-4% across products and stock keeping unit (SKUs) in the home care, household care and laundry portfolio, and some hike in the personal care portfolio as well, during the quarter. Some of the price hikes taken may be reflected in the subsequent quarter.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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