Prabhudas Lilladher's research report on Hindustan Unilever
HUL has given cautious commentary in 4Q22 as high input costs and inflation will continue to weight on volume growth and margins in 1H23. 4Q22 displayed flat volumes despite mid-single digit volume growth in Fabric wash, showing growth concerns in BPC portfolio. Near term margin headwinds are likely to sustain due to 1) inflationary environment in commodity basket. 2) down trading of products across categories 3) rising gap between realisations vs commodity prices. However, we remain positive on the longer term structural story given 1) sustained market share gains 2) strong innovation pipeline 3) scale up in emerging categories (Green Tea, Fabric Conditioner, Liquid Detergents, Liquid Dishwash, Hair conditioner) 4) distribution gains from strategies like WIMI and SHIKHAR and 5) faster growth in premium portfolio (2x than company growth).
Outlook
We expect 11.0% Sales and 13.6% PAT CAGR over FY22-24 and assign a DCF based target price of Rs 2384 (Rs 2356 earlier). We have marginally increased our FY23/24 EPS by 0.7%/1.2% on calibrated price hikes & cost synergies.
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