MOSL: THE CORNER OFFICE (HINDUSTAN UNILEVER) — Exciting growth prospects ahead-Premiumization, better execution, technology – the key drivers
​THE CORNER OFFICE (HINDUSTAN UNILEVER) — Exciting growth prospects ahead; Premiumization, better execution, technology – the key drivers
Sanjiv Mehta took over as the CEO and Managing Director of HUL in October 2013. He has done his Bachelors in Commerce (India), Chartered Accountancy (India) and has also completed his Advanced Management Program from Harvard Business School. Sanjiv has been with Unilever for nearly 25 years and for the last 15 years he has led businesses in different parts of the world. He had been Chairman and Managing Director of Unilever Bangladesh Limited (2002-06), Chairman and CEO of Unilever Philippines Inc. (2007 -08) and Chairman of Unilever - North Africa & Middle East (2008 – September 2013).
Key highlights:
- For Hindustan Unilever (HUVR), we believe that four key trends are particularly relevant from the earnings growth perspective - (i) its rapidly improving adaptability to market requirements, (ii) its recognition of Naturals as a key category, (iii) continuing strong trend toward premiumization (to be driven by GST-led price reductions) and (d) extensive plans to employ technology (will provide it with competitive edge).
- Growth opportunities remain high (especially driven by the aforementioned trends) even in its largest categories and brands. Rural outlook is also turning positive.
- HUVR remains our top large-cap pick among the rural consumer recovery plays. Our preference for HUVR is driven by a multitude of factors, as highlighted in our rural strategy reports released in Nov'2017 and Aug'2017. For HUVR, we expect 18.6% PAT CAGR over FY17-19, as against a CAGR of 6.1% over the last three years, 10.6% over the last five years and 10.7% over the last 10 years. Valuations are not cheap at 47.6x/40.6x FY19/FY20E EPS; however, given the potentially strong earnings growth, we believe the premium valuations are justified, particularly as return ratios and dividend yield are best-of-breed. We maintain our Buy rating on the stock, and also our target price of INR1,500 (48x December 2019E EPS; 10% premium to three-year average valuations).
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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