Result Analysis-Hindustan Unilever Ltd

Result Highlight: 

• HUL Revenue rose 70% QoQ and 11% YoY to ₹ 12516 crore – inline with the estimates of ₹ 2175 Crore. Other income fall 25% YoY to ₹ 113 Crore.

• EBITDA Margin was flat at 02% from 24.27% last quarter.

• Net profit rose 8.86% YoY to ₹2187 crore for the September quarter compared with ₹ 2009 crore in the same quarter last Reported strong operating Cash flow of ₹ 4101 Cr in Q2.

• EBITDA for the quarter at ₹ 3132 crore grew by 9%.

• Home Care Business grew 16% y-o-y.

• Beauty & Personal Care grew 10% led by Skin Care, Colour Cosmetics and Hair Care. Contextual communications in Hair Care continue to yield good results as it delivered another quarter of strong performance.

• The company approved an interim dividend of ₹ 15 per

• Volume Growth came in at 4% which was below street expectation.

Management commentary: 

• Sanjiv Mehta, Chairman and Managing Director said “September quarter witnessed a sequential improvement in trading conditions, albeit remained challenging with unprecedented levels of input cost inflation and subdued consumer sentiments. In this backdrop, we have delivered a strong performance growing topline in double digits and stepping up profitability sequentially. Large parts of our business continue to gain market shares and penetration. Calibrated price increases and laser sharp focus on savings has helped us protect our business model while ensuring the right price-value equation for our consumers”.

• Management said they remain cautiously optimistic about demand recovery. In these times of uncertainty and unprecedented input cost inflation.

• Gross margin likely to remain under pressure; because of the rise in material cost but Judicious pricing actions coupled with cost agility and savings programmes will minimize the impact of high cost on margin.

• 15% of the total revenue came from digital market, and this market will continue to grow going forward.

• Total revenue growth came at 11% out of which 4% was volume growth and 7% was price growth

• Management said rural market demand is normalizing and urban market demand is picking up.

• HUL is making huge investment in new innovative product which are expected to hit market in coming quarter.

• Ocean Freight cost is also having an impact on margins and it is expected to remain northward going forward due to container shortage.

• Management said they are seeing very good rebound in their Ice cream segment.

• Management said that they have taken 7% price hike to offset cost pressure and will continue to take more hike to maintain margins.

 OUTLOOK

HUL Q2FY22 result was mostly inline to the street expectation but the biggest disappointment was the volume growth which came in at 4% which was lower than street expectation of 6-7%, Revenue grew 11% of which 7% was price growth and 4% was volume growth PAT came in at ₹ 2187 crore, EBITDA margin was flat compared to last year at 25%. Company has manage margin well, as there raw material cost has moved up sharply, around 15% of total revenue come from digital market.HUL has gained market share in many segment and are expected to launch new products in coming quarter, management is quite confident of the uptick in demand as economy is opening up and ecomonic activity is picking up and fells they are going to pass on the material cost hike to their customer We believe margin may come under little pressure due to palm oil prices, crude prices and ocean freight cost . At the CMP of ₹2546, HUL is trading at PE multiple of 64x. Valuing the company at 62x FY23E EPS, we recommend buy on HUL at CMP of for the Target Price of ₹ 2850.

Disclosure in pursuance of Section 19 of SEBI (RA) Regulation 2014

Elite Wealth Limited does/does not do business with companies covered in its research reports. Investors should be aware that the Elite Wealth Limited may/may not have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only information in making their investment decision and must exercise their own judgment before making any investment decision.
For analyst certification and other important disclosures, see the Disclosure Appendix, or go to www.elitewealth.in. Analysts employed by Elite Wealth Limited are registered/qualified as research analysts with SEBI in India.( SEBI Registration No.: INH100002300)
Disclosure Appendix
Analyst Certification (For Reports)
Israil Khan, Elite Wealth Limited, suhail@elitewealth.in
The analyst(s) certify that all of the views expressed in this report accurately reflect my/our personal views about the subject company or companies and its or their securities. I/We also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Elite Wealth Limited.
As to each individual report referenced herein, the primary research analyst(s) named within the report individually certify, with respect to each security or issuer that the analyst covered in the report, that:
(1) all of the views expressed in the report accurately reflect his or her personal views about any and all of the subject securities or issuers; and
(2) no part of any of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in the report.
For individual analyst certifications, please refer to the disclosure section at the end of the attached individual notes.
Research Excerpts
This note may include excerpts from previously published research. For access to the full reports, including analyst certification and important disclosures, investment thesis, valuation methodology, and risks to rating and price targets, please visit www.elitewealth.in.
Company-Specific Disclosures
Important disclosures, including price charts, are available and all Elite Wealth Limited covered companies by visiting https://www.elitewealth.in, or emailing research@elitestock.com with your request. Elite Wealth Limited may screen companies based on Strategy, Technical, and Quantitative Research. For important disclosures for these companies, please e-mail research@elitestock.com.
Options related research:
If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the risk disclosure documents, please contact your Broker’s Representative or visit the OCC’s website at https://www.elitewealth.in
Other Disclosures
All research reports made available to clients are simultaneously available on our client websites. Not all research content is redistributed, e-mailed or made available to third-party aggregators. For all research reports available on a particular stock, please contact your respective broker’s sales person.
Ownership and material conflicts of interest Disclosure
Elite Wealth Limited policy prohibits its analysts, professionals reporting to analysts from owning securities of any company in the analyst’s area of coverage. Analyst compensation: Analysts are salary based permanent employees of Elite Wealth Limited. Analyst as officer or director: Elite Wealth Limited policy prohibits its analysts, persons reporting to analysts from serving as an officer, director, board member or employee of any company in the analyst’s area of coverage.
Country Specific Disclosures
India – For private circulation only, not for sale.
Legal Entities Disclosures
Mr. Ravinder Parkash Seth is the Managing Director of Elite Wealth Ltd (EWL, henceforth), having its registered office at Casa Picasso, Golf Course Extension, Near Rajesh Pilot Chowk, Radha Swami, Sector-61, Gurgaon-122001 Haryana, is a SEBI registered Research Analyst and is regulated by Securities and Exchange Board of India. Telephone:011-43035555, Facsimile: 011-22795783 and Website: www.elitewealth.in
EWL discloses all material information about itself including its business activity, disciplinary history, the terms and conditions on which it offers research report, details of associates and such other information as is necessary to take an investment decision, including the following:
1. Reports
a) EWL or his associate or his relative has no financial interest in the subject company and the nature of such financial interest;
(b) EWL or its associates or relatives, have no actual/beneficial ownership of one per cent. or more in the securities of the subject company, at the end of the month immediately preceding the date of publication of the research report or date of the public appearance;
(c) EWL or its associate or his relative, has no other material conflict of interest at the time of publication of the research report or at the time of public appearance;
2. Compensation
(a) EWL or its associates have not received any compensation from the subject company in the past twelve months;
(b) EWL or its associates have not managed or co-managed public offering of securities for the subject company in the past twelve months;
(c) EWL or its associates have not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months;
(d) EWL or its associates have not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months;
(e) EWL or its associates have not received any compensation or other benefits from the Subject Company or third party in connection with the research report.
3 In respect of Public Appearances
(a) EWL or its associates have not received any compensation from the subject company in the past twelve months;
(b) The subject company is not now or never a client during twelve months preceding the date of distribution of the research report and the types of services provided by EWL