HLL's quarterly trends unimpressive: SSKI

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HLL's quarterly trends unimpressive: SSKI

For a review on the HLL numbers, we are joined by Nikhil Vora of SSKI. He is not really impressed with the quarterly trends and feels that market share sustenance for the company is coming at an incrementally higher cost.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets HUL BSE | NSE 25/05/12 Are Mutual Funds betting on HUL?

The HLL numbers, according to Nikhil Vora of SSKI are pretty much mediocre and do not really reveal a direction for the business. He is not really impressed with the quarterly trends and feels that market share sustenance for the company is coming at an incrementally higher cost. So, effectively, business seems to have caught in a period where the topline growth is just getting reflective on the bottomline without any improvements in the margin profile or the quality of earnings of that business.

Excerpts from CNBC-TV18's exclusive interview with Nikhil Vora:

Q: What do you make of the numbers now and what is the call on the stock?

A: I think the numbers are pretty much mediocre and do not really reveal a direction for the business. I am not really impressed with the quarterly trends as we have looked at over the last few quarters and still find that a struggle upheaval for Levers and the fact is that market share sustenance, which obviously Lever has been doing, is coming at an incrementally higher cost. So effectively the business seems to have caught in a period where the topline growth is just getting reflective on the bottomline without any improvements in the margin profile or really the quality of earnings of that business.

Q: What would your call be on the stock at Rs 200?

A: We have maintained neutral on Lever; we do not really see a material stock price erosion from the current levels but that does not necessarily mean that the worse is over because I think operationally, the business is still searching for innovations given their product lines, which is not really happening; also, we think that there is a lag in business direction in terms of categories and product lines.

Q: On the margin front, what is your expectation because the company has made a statement in their press conference saying that they would be looking at judicial hikes. What kind of a price hike on products would you be factoring in, due to the kind of raw material cost pressures that the company has been facing?

A: I have always believed that raw material price impacts for consumer products are always very negligible. In a business where gross contribution are over 50-55%, I do not see any material price increase to have a substantial bearing on margins. I think what it really implies is the fact that the ability to have the branding power in your business has come down significantly over the last few years, which is reflecting on the margin profile and that has actually been maintained rather than seeing an increase.