MSL: HINDUSTAN UNILEVER (Buy)-Prospects boosted by focus on nimbleness Technology use across functions to provide competitive advantage

HINDUSTAN UNILEVER: Prospects boosted by focus on nimbleness; Technology use across functions to provide competitive advantage

(HUVR IN, Mkt Cap USD50.8b, CMP INR1573, TP INR1840, 17% Upside, Buy)

We attended Hindustan Unilever’s (HUVR) Annual Investor Meet 2018. The key highlights of the meet can be summed up by the following four statements of management, which indicated how much the company has changed over the past few years in terms of agility and entrepreneurship – in turn, enabling it to move to a promising earnings growth trajectory. 

• “It is not the big that will win; it is the faster who has the advantage”. 
• “Willing to disrupt their own practices, would rather be a disruptor than be disrupted, and believe in challenging status quo”.
• “Culture eats strategy for breakfast”. 
• “Delegation does not mean abdication; guardrails are provided by the top management”.

We maintain buy rating with the target price of INR 1840.

 A few of the interesting quotes from CEO Mr Sanjiv Mehta:

• “It is not the big that will win; it is the faster who has the advantage” – This is a remarkable statement by a company of its size. It is reflective of the company’s new culture, which has brought in much higher awareness, renewed nimbleness, a high degree of flexibility and pro-activeness – something that was missing until the beginning of this decade.
• “Willing to disrupt their own practices, would rather be a disruptor than be disrupted, and believe in challenging status quo” – HUVR is now looking at the entire, end-to-end value chain. This disruption is clearly visible in the sheer level of execution in the herbal portfolio – not just limited to Lever Ayush (where the company has exhibited remarkable agility to move from conception to successful execution within a short period time in response to growing demand for Naturals) but also in the acquisition and highly successful scale-up of Indulekha, the launch of herbal variants in most of its key categories, and the launch of global products like Citra and St Ives. Notably, all this is executed simultaneously and successfully at a pace that has surprised many over the past two years. The huge importance given to analytics is another key disruption, which could provide the company with a long-term competitive advantage and enable it to overcome the difficulties posed by its relatively large size compared to peers. To successfully implement data analytics in every function, HUVR has appointed head data scientists, who will be part of top management.