MOSL: HINDUSTAN UNILEVER (Buy)-Earnings momentum strong, reinforcing investment case further
HINDUSTAN UNILEVER: Earnings momentum strong, reinforcing investment case further
(HUVR IN, Mkt Cap USD61.3b, CMP INR2015, TP INR2265, 12% Upside, Buy)
- Reported net sales grew 6.7% YoY to INR98.5b (our estimate: INR98.8b). EBITDA rose 21% YoY to INR24.4b (16% on a comparable basis after adjusting for Ind-AS 116; our estimate: +14.4% to INR23.1b), while PAT (bei) was up 20.4% YoY to INR18.3b (our estimate: INR16.1b). In contrast to our expectation, the company has started utilizing the corporate tax benefits from 2QFY20 itself, leading to a sharp PAT beat. Domestic consumer business sales were up 7% YoY, led by underlying volume growth of 5% YoY (our estimate: 6%).
- Gross margins stood at 54.5%, while the EBITDA margin expanded 290bp YoY to 24.8% - up 210bp YoY adjusted for Ind-AS 116 and 50bp adjusted for the impact of government grants. Notably, HUVR delivered a margin improvement despite a 20bp YoY/70bp QoQ increase in ad spend.
- Segmental performance: Revenue was up 9.4% YoY at Home Care (34% of sales) and 5.3% YoY at Personal Care. Food & Refreshments (19% of sales) sales were up 8.4% YoY. Margin expanded 150bp YoY in Home Care and 260bp YoY in Personal Care, but shrank 140bp YoY in F&R.
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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