MOSL: HINDUSTAN UNILEVER (Buy)-Robust performance, margins surprise yet again
Hindustan Unilever: Robust performance, margins surprise yet again
(HUVR IN, Mkt Cap USD61.7b, CMP INR2034, TP INR2280, 12% Upside, Buy)
- Volume growth of 5% was remarkable, given the high base (double-digit growth in 3QFY19), the weak operating environment and its size versus peers.
- EBITDA and PAT increase of ~20% was also highly creditable, coming off a base of 22% EBITDA and 17% PAT growth.
- However, given the subdued operating outlook, we maintain our EPS forecast for FY21 and FY22, despite the beat over our estimates.
- Our numbers do not include the GSKCH merger (NCLT approval awaited), adjusted for which valuations stand at 47.7x FY21E and 40.7x FY22E. Maintain Buy.
Stellar performance; PAT above estimate; volume growth noteworthy
- Reported net sales increased 2.6% YoY to INR98b (our estimate: INR99.7b). EBITDA of INR24.5b was up 19.5% YoY (14% on a comparable basis after adjusting for Ind-AS 116; our estimate: +9.3% to INR22.4b), PBT grew 15.7% to INR23.3b (our estimate: INR22b), while PAT (bei) increased 20.7% YoY to INR16.9b (our estimate: INR16b). Gross margin expanded by 40bp YoY to 54.2% and EBITDA margin by 350bp YoY to 24.9%.
- For 9MFY20, revenue/EBITDA/PAT increased 5.3%/19.3%/17.5% YoY.
- Domestic consumer business sales were up 4% YoY, led by underlying volume growth of 5% YoY (our estimate: 4%).
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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