MOSL: HINDUSTAN UNILEVER (Buy)-Juggernaut moves forward-Earnings outlook better than it has been for many years
​HINDUSTAN UNILEVER: Juggernaut moves forward; Earnings outlook better than it has been for many years
(HUVR IN, Mkt Cap USD35.3b, CMP INR1043, TP INR1165, 12% Upside, Buy)
- A confluence of positives including expectations of normal monsoon, moderate inflation, government schemes aiding consumption growth, weak base of the past three years, end of commodity price deflation, continued premiumization, and cost savings is leading to outlook for rural-focused companies being brighter than in the past few years.
- For HUVR, the salience of rural sales is one of the highest, brand portfolio is the widest, and distribution reach is the broadest among peers, making it uniquely positioned to take advantage of the confluence of positive factors.
- We expect earnings CAGR of 15% over FY17-19, far superior than the 6-11% for the past 3/5/10 years. This along with best-of-the-breed return ratios and dividend yield justifies HUVR's premium valuations. The stock trades at 40.1x FY19E EPS. We reiterate Buy with a price target of INR1,165 (45x FY19E EPS; 5% premium to 3-year average).
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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