MOSL: HINDUSTAN UNILEVER-Expect gradual improvement-CSD segment yet to recover to normalcy
​HINDUSTAN UNILEVER: Expect gradual improvement; CSD segment yet to recover to normalcy
(HUVR IN, Mkt Cap USD41.4b, CMP INR1204, TP INR1400, 13% Upside, Buy)
We spoke with Hindustan Unilever’s (HUL) management to understand the latest trends in its business. Key takeaways:
- GST impact - recovering, but still not completely out of woods
- ​Wholesale in the south and west regions has returned to normative levels. Other parts are still lagging, though.
- Cash and Carry is picking up some slack from the slowdown in wholesale.
- For July sales, offline reconciliation on GST has been done with all leading distributors. It will take until October for complete reconciliation.
- Canteen Stores Department (CSD) is going through a transformation on checks and balances. Thus, up-stocking has not yet happened. Sales are not completely normal even now from this channel.
- Rural demand is expected to improve gradually. Early to call out now.
- There have been clear signs of pressure on small players; expect market share improvement for organized and larger players with direct reach
- ​GST accounting - detailed impact to be explained with 2QFY18 results
- ​Turnover will reset downward because of passing on of GST benefits.
- Multiple cost lines items of P&L will benefit from input credits. These have also been passed on.
- Absolute EBIT and EBITDA will not change on GST accounting, but margins will be higher.
- Management will explain GST accounting-related impact in detail post 2QFY18 results.
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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