Hold Hindustan Unilever; target of Rs 2410: ICICI Direct

ICICI Direct's research report on Hindustan Unilever

Hindustan Unilever (HUL) reported 4.4% revenue growth with the inclusion of acquired brands (Horlicks, Boost) revenue. On a like to like basis, revenue fell 7% with 8% volume dip. Despite manufacturing & supply chain disruption in April, May, the home care segment saw mere 2.1% decline in revenues. The company has been able to refill the distributor pipeline by June 2020 to pre-Covid levels. Beauty & personal care segment (BPC) segment saw 12.0% sales decline severely impacted by cosmetics, skin care & deodorants. However, soaps, sanitisers saw a strong surge in demand. The company has augmented hand wash capacity by 5x to meet the surge in demand aided by increasing hygiene awareness. Foods & refreshments category grew 52% with the inclusion of acquired brands sales. On a like to like basis, revenues fell 4% with ice-cream business severely impacted by lockdown. However, ketchup, tea & coffee witnessed strong double digit growth with increasing in-home consumption. Operating margins contracted 113 bps with 220 bps shrinkage in gross margins. The reduction in A&P spend by 393 bps partially offset the operating de-leverage impact on other costs. Net profit increased 7.2%.

Outlook

The strong performance in unprecedented quarter shows resilience of FMCG business. We expect HUL to be able to leverage structural demand trends in health & hygiene space with strong brands (Lifebuoy, Surf excel, Domex, Vim). We also expect strong growth in packaged foods, tea, coffee to continue in medium term. Maintain HOLD with revised TP of Rs 2410.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More