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May 02, 2012, 10.04 AM IST | Source: CNBC-TV18

Prefer HUL over ITC: Espirito Santo

Hindustan Unilever's (HUL) fourth quarter net profit rose better-than-expected. Nitin Mathur, Espirito Santo says, the result is very good. He has a 'buy' rating on Hindustan Unilever. "I prefer it over ITC where I have a 'sell' rating. So, I continue to maintain a long-term 'buy' rating on Hindustan Unilever," he adds.

Nitin Mathur

Consumer Research Analyst, Espirito Santo

Expertise : Equity - Fundamental

More about the Expert...

Hindustan Unilever 's (HUL) fourth quarter net profit rose better-than-expected 21% year-on-year to Rs 687 crore, helped by strong growth across segments.

In an interview to CNBC-TV18, Nitin Mathur, Espirito Santo says, the result is very good. "I am quite excited to see these numbers and will definitely revise my numbers from these levels," he adds.

He has a 'buy' rating on Hindustan Unilever. "I prefer it over ITC where I have a 'sell' rating. So, I continue to maintain a long-term 'buy' rating on Hindustan Unilever," he adds.

Below is the edited transcript of his interview on CNBC-TV18. Also watch the accompanying video.

Q: What you have made of HUL numbers?

A: I think the volume growth of 10% is pretty healthy, considering a base of 14% in Q4 last fiscal year. In addition, I think the company has always stressed out a successful profitable growth strategy. I see this quarter results again as a testimony of those strategy playing out.

Another thing, which stands out, is that there was no signs of volume demand tapering off despite 5-6% of price increases. So, I think overall very good, healthy set of numbers. I am quite excited to see these numbers and will definitely revise my numbers from these levels.

Q: What exactly you made of the margins?

A: Margins in the personal products business has increased as well as in the soap business has increased on year-on-year (YoY) basis. I think the recent price increases as well as cost structure rationalisation has led to that margin expansion. I will again have to look at more details of the break-up of that margin expansion.

Q: There was some concern coming in with regards to the personal care segment, with regards to the oral care segment, what exactly would you be watching out from that front? How concerned would you be after you have looked at the numbers, considering personal products has grown 17%, also there is an EBIT margin expansion to 26.3%?

A: They had issue in the last quarter on the oral care portfolio. So I wouldn’t be too concerned on that. I think 17% volume growth in personal product is a pretty healthy number to look at. So, no concerns there. I think they are pretty much on track of long-term strategy in personal products business.

Q: What is your call on the stock now currently considering that HUL is already trading at around 29-30 times FY13 P/E?

A: I have a 'buy' rating on Hindustan Unilever. I think I prefer it over ITC where I have a 'sell' rating. So, I continue to maintain a long-term 'buy' rating on Hindustan Unilever.

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