Accumulate Hindustan Unilever; target of Rs 2798: Prabhudas Lilladher

Prabhudas Lilladher's research report on Hindustan Unilever

We attended HUVR’s analyst meet where the management reiterated its strategy to grow the consumer franchise through 1) competitive growth in core offerings 2) premiumisation initiatives 3) market development activities 4) winning in future channels like MT/E-com. HUL continues to leverage its WIMI strategy to drive penetration by providing differentiated products across regions. The company continues to nurture future categories which includes body wash, liquid detergent, hair conditioners, face wash, body lotions, sunscreens, BB/CC creams etc. We believe market development initiatives in emerging categories and higher share in MT/E-com can result in growth acceleration in coming years. HUL will continue to compete at the bottom of pyramid as large mass of customers will take time to graduate to more premium products. We believe this will continue to provide competitive growth to the company. Adoption of technology across the organization continues to help the company predict demand patterns, take pricing decisions, reduce time for innovation amongst other benefits.

Outlook

HUVR’s long term story remains intact (24-25% margin guidance) with input costs having peaked out. We estimate 16.6% PAT CAGR over FY22-25 and arrive at DCF based target price of Rs2798 (unchanged). Maintain Accumulate.

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