MOSL: HINDUSTAN UNILEVER (Buy)-Significant ‘levers’ for earnings growth
Hindustan Unilever: Significant ‘levers’ for earnings growth
(HUVR IN, Mkt Cap USD65.4b, CMP INR2153, TP INR2490, 16% Upside, Buy)
- Hindustan Unilever (HUVR) has been a stellar performer over the past decade, both in terms of earnings and stock price. Also, it has significantly outperformed some of its large-cap consumer peers over the same period.
- Factors that have led to HUVR’s strong earnings performance viz. nimbleness, stringent cost savings, premiumization and best-of- breed analytics are likely to benefit the company in the future as well.
- From a near-term perspective, favorable base in the next few quarters, expected recovery in the demand environment from 2QFY21, synergies from the GSKCH merger, price increase in soaps and lower crude costs are likely to boost earnings.
- We expect HUVR’s high-teens earnings growth on an organic basis (23% CAGR including the GSKCH merger and synergies) witnessed in recent years to continue. Taking into account the best RoEs among consumer peers, we believe that the stupendous wealth generation track record of HUVR is likely to continue. We raise our target multiple to 50x FY22E EPS on the merged numbers resulting in our target price changing to INR2,490 (16% upside). Maintain Buy.
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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