Hold Hindustan Unilever; target of Rs 414: KRChoksey

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Hold Hindustan Unilever; target of Rs 414: KRChoksey

KRChoksey has recommended hold rating on Hindustan Unilever (HUL) with a target of Rs 414, in its February 7, 2012 research report.

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KRChoksey has recommended hold rating on Hindustan Unilever (HUL) with a target of Rs 414, in its February 7, 2012 research report.

"Hindustan Unilever (HUL), net sales improve significantly by 16% y-o-y, in line with our estimates, on the back of 9.1% underlying volume growth in the domestic consumer business & ~ 7% price hikes. On segmental basis, all segments reported double digit revenue growth with key contributors being Soaps & Detergents (21% y-o-y), Personal Products (14% y-o-y) & packaged foods (13% y-o-y). Soaps & Detergents performance driven by healthy mix of volumes & price hikes Slight disappointment in the Personal care segment on account of high base and weak oral care performance."

"EBIT margins for Soaps & Detergents and packaged food segment improved 573 bps y-o-y( on account of price hikes & lower adspends) and 421 bps y-o-y , partially offset by decline in Personal Products and beverage margins (On account of higher ad spends for the segment) Gross margins improved sequentially (down 143 bps y-o-y) on account of price hikes and some moderation in raw material prices. Adspends as a% to sales remained flat at 11.8% sequentially. However on Y-o-Y basis the decline was ~300 bps, coupled with 124bps y-o-y decline in other expenses resulting in margin expansion of 271 bps y-o-y to 15.1%. Adj PAT up 30% y-o-y to Rs 762 crores on the back of strong operational performance, partially impacted by higher effective tax rate."

"HUL continued with strong quarterly performance with topline growth of 16% y-o-y (up 6%q-oq), inline with our estimates. Topline growth was driven by 9.1% y-o-y underlying volume growth & realization/mix growth of 7%in the Domestic consumer business. HUL reported double digit growth across segments with its key segments Soaps & Detergents (improved volumes & double digit growth across brands) and Personal Products(driven by skin & Hair care) leading the pack registering 21% and 14% y-o-y revenue growth. Packaged Foods & Beverage segment to reported healthy performance with 13% and 11% y-o-y growth. EBIT growth was largely driven by Soaps & Detergent segment, partially offset by flattish EBIT performance in the Personal product and Beverage segment. EBIT margins for the soaps & detergent category (up 573 bps y-o-y) improved on back of product mix & lower adspends. We believe with no more price wars & judicious price hikes the current EBIT margins are sustainable. Margins for personal care (down 294 bps y-o-y) were impacted by higher adspends & poor oral care performance."

"We maintain our positive outlook on the stock and believe 20% earnings CAGR growth over FY11-13E is achievable considering healthy volume growth & improved margins(product mix & judicious spends).We recommend HOLD on stock with a target price of Rs. 414, (29x FY13E EPS of Rs 14.4), giving an upside potential of 8%," says KRChoksey research report. 

Institutional holding more than 40% in Indian cos

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