MOSL: HINDUSTAN UNILEVER (Upgrade to Buy)-Beat on all fronts-Positive outlook on monsoon
Hindustan Unilever: Beat on all fronts; Positive outlook on monsoon; Upgrade to Buy
(HUVR IN, Mkt Cap USD33.7b, CMP INR1006, TP INR1165, 16% Upside, Buy)
- HUVR's 4QFY17 net sales increased 6.4% YoY (est. of +4.5%) to INR82.1b. Domestic consumer business rose 8% YoY, with underlying volumes growing 4% YoY (adjusted for pipeline correction, 2.5%-3% growth v/s est. of -0.5%). EBITDA increased by 12.2% YoY to INR16.5b (est. of INR14.6b) and adj. PAT by 6.2% YoY to INR11.2b (1.4% above estimate).
- Personal care sales grew at a healthy 8.1% YoY. Home care sales rose 7.4% YoY. Growth was 2.4% YoY in foods and 10.5% YoY in refreshments.
- Gross margin contracted 20bp YoY to 51% v/s estimate of -160bp, mainly because of healthy personal care sales, a segment where margins are far superior to other segments. The decline of 100bp YoY in staff costs and 80bp in A&P also contributed to the margin beat. Consequently, EBITDA margin at 20.1% expanded 100bp YoY (est. of -100bp).
- FY17 performance: Sales were up 3% YoY (1% volume growth) at INR319b, EBITDA margin improved 40bp YoY and adj. PAT grew 3% YoY to INR42.5b.
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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