We expect the company to deliver PAT CAGR of 20 percent over the period FY19-21 and recommend a buy with a target price of Rs 1,923.
In Q3FY19, Hindustan Unilever's domestic consumer growth was at 13 percent with underlying volume growth at 10 percent. HUL’s prudent management of volatility in costs (crude and currency led) along with improved mix and operating leverage has driven marginal improvement.
The company’s focus on strengthening the core and leading market development by tapping into emerging trends has been yielding results across categories.
Fabric wash and household care division reported impressive performance with double digit growth. In addition, beauty and personal care segment had a very good quarter. Personal wash growth continued to be driven by premiumization of the portfolio.
The company witnessed revenue growth of 11.3 percent YoY to Rs 9,558 crore led by 10 percent underlying volume growth. EBITDA also registered a growth of 21.8 percent on YoY basis to Rs 2,046 crore.
The company’s acquisition of GSK Consumer’s India business would augur well for the company in reducing its dependence on the traditional segments like homecare, personal care and will help diversify in Health foods segment.
Iconic brands of GSK combined with HUL capabilities will unlock significant growth opportunities for the company. As part of this merger, health drinks including Boost, Horlicks and Maltova — the mainstays of GSK Consumer will now move to the HUL stable.
For HUL, it is a unique opportunity, to have the number one health food drink portfolio in the largest HFD market globally. The HFD category is over Rs 7,700 crore and is poised to grow well on back of strong structural demand drivers, namely favourable demographics, rising affluence, disposable income and persistent nutritional needs.
We expect the company to deliver PAT CAGR of 20 percent over the period FY19-21.
We recommend a buy with a target price of Rs 1,923 with a horizon of 12 months.
The author is Vice-President - Research at Ajcon Global ServicesDisclaimer: The views and investment tips expressed by investment experts 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.
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