Hold Hindustan Unilever; target of Rs 1206: KR Choksey
KR Choksey recommended hold rating on Hindustan Unilever with a target price of Rs 1206 in its research report dated July 18, 2017.
July 19, 2017 / 05:59 PM IST
KR Choksey's research report on Hindustan Unilever
Hindustan Unilever Ltd (HUL) posted its Q1FY18 results which were in-line with our estimates, accept for EBIDTA margins which was above our estimates. Net revenue for Q1FY18 reported at INR 92220.0 Mn which grew by 5.0% y-o-y and 3.5% q-o-q. Domestic consumer business growth was around 6% and volume growth remained flat for the quarter. EBIDTA for Q1FY18 stood at INR 18660.0Mn with margins at 20.2% which was an increase of 166bps yoy and 165bps qoq. PAT before exceptional item for Q1FY18 stood at INR 12960 Mn and PAT margin was at 14.1% which was an increase of 72bps yoy 73bps qoq. Exceptional item of INR 130 Mn was one time expense (provision for employee benefits) during Q1FY18.Outlook
HUL being the largest player in consumer sector has seen improvement in margins with single digit growth in Q1FY18. HUL strategy to remain same like investing in its brands, focusing on core business with innovative products and margin and volume lead growth with improvement in cost across its segments. However with slow demand on rural area it focus to remain on improving demand. With GST implementation we believe there will be win-win situation for consumers as there will be reduction in price of certain products which will benefit consumers. HUL being market leader in many of its categories we expect revenue growth of around 5% in FY18E & FY19E, while EBIDTA and PAT margins to be around 18.1% and 13.2% in FY19E. At CMP 1158, HUL is trading at EPS of INR 23.2 its FY19E and we are revising the price target to INR 1206 with “HOLD” rating on the stock and an upside of 4.2% as we remain optimistic about the demand scenario, premium products of the company, brand recall, innovative products, etc against its competitors.
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