December 3, 2018 CMP: ₹1,836 Time Horizon 12 Months Target ... · 3 Anand Rathi Research History...

23
Anand Rathi Research Time Horizon – 12 Months December 3, 2018 Sep-18 Jun-18 Mar-18 Dec-17 Promoter 67.2% 67.2% 67.2% 67.2% Institutions 19.4% 19.4% 19.4% 19.2% Others 13.4% 13.4% 13.4% 13.6% Total 100% 100% 100% 100% Source: Company, Anand Rathi Research, Bloomberg V A L U E P I C k (In Mn.) FY-17 FY-18 FY-19E FY-20E Net Sales 3,32,520 3,55,500 4,01,280 4,57,561 EBITDA 63,270 75,010 87,319 1,01,854 EBITDA Margin 19.0% 21.1% 21.8% 22.3% PAT 44,760 52,140 63,640 74,228 EV/Sales 12.0 11.2 9.9 8.7 EV/EBITDA 59.4 50.4 42.1 36.2 P/E (x) 88.8 76.2 62.4 53.5 Price Performance CY15 CY16 CY17 YTD Absolute 14% -4% 66% 34% Relative 14% 1% 30% 38% Relative stock performance (Dec’17=100) CMP: ₹1,836 Target: ₹2,250 Shareholding Pattern (as on Sep’18) Key Data Bloomberg Code HUVR IN NSE Code HINDUNILVR BSE Code 500696 Sector FMCG Industry FMCG Face Value (₹) 1.0 BV per share (₹) 34 Dividend Yield (%) 1.1% 52 Week L/H(₹) 1,241 / 1,808 Market Cap. (₹ Mn.) 39,74,295 NOTE: HUL-GSK-CH amalgamation has been announced today. Our financials does not include GSK-CH as deal is pending shareholder approval. Hindustan Unilever Limited (HUVR) 80 100 120 140 160 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Nifty 500 HUVR Analyst: Narendra Solanki [email protected]

Transcript of December 3, 2018 CMP: ₹1,836 Time Horizon 12 Months Target ... · 3 Anand Rathi Research History...

Page 1: December 3, 2018 CMP: ₹1,836 Time Horizon 12 Months Target ... · 3 Anand Rathi Research History and Key Milestones Source: Company, Anand Rathi Research Year Key historic Milestone

Anand Rathi Research

Time Horizon – 12 Months

December 3, 2018

Sep-18 Jun-18 Mar-18 Dec-17

Promoter 67.2% 67.2% 67.2% 67.2%

Institutions 19.4% 19.4% 19.4% 19.2%

Others 13.4% 13.4% 13.4% 13.6%

Total 100% 100% 100% 100%

Source: Company, Anand Rathi Research, Bloomberg

V

A

L

U

E

P

I

C

k

(In ₹ Mn.) FY-17 FY-18 FY-19E FY-20E

Net Sales 3,32,520 3,55,500 4,01,280 4,57,561

EBITDA 63,270 75,010 87,319 1,01,854

EBITDA Margin 19.0% 21.1% 21.8% 22.3%

PAT 44,760 52,140 63,640 74,228

EV/Sales 12.0 11.2 9.9 8.7

EV/EBITDA 59.4 50.4 42.1 36.2

P/E (x) 88.8 76.2 62.4 53.5

Price Performance CY15 CY16 CY17 YTD

Absolute 14% -4% 66% 34%

Relative 14% 1% 30% 38%

Relative stock performance (Dec’17=100)

CMP: ₹1,836

Target: ₹2,250

Shareholding Pattern (as on Sep’18)

Key Data

Bloomberg Code HUVR IN

NSE Code HINDUNILVR

BSE Code 500696

Sector FMCG

Industry FMCG

Face Value (₹) 1.0

BV per share (₹) 34

Dividend Yield (%) 1.1%

52 Week L/H(₹) 1,241 / 1,808

Market Cap. (₹ Mn.) 39,74,295

NOTE: HUL-GSK-CH amalgamation has been announced today. Our financials does not include GSK-CH as deal is pending shareholder approval.

Hindustan Unilever Limited (HUVR)

80

100

120

140

160

Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

Nifty 500 HUVR

Analyst: Narendra [email protected]

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Hindustan Unilever Limited (HUVR/HUL) is India’s largest fast-moving consumer goods (FMCG) company with a heritage of over 80 years. Nine out of tenIndian households use its products everyday to feel good, look good and get more out of life; giving us a unique opportunity to build a brighter future.

Each of its categories – Home Care, Personal Care, Foods and Refreshments – includes a portfolio of brands that serves consumers across the length andbreadth of India. With over 40 brands spanning 20 distinct categories including soaps, detergents, shampoos, skincare, toothpastes, deodorants,cosmetics, tea, coffee, packaged foods, ice cream, frozen desserts, water and air purifiers.

Its portfolio includes leading brands such as Lux, Lifebuoy, Surf excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk,Pepsodent, Closeup, Axe, Brooke Bond, BRU, Knorr, Kissan, Kwality Wall’s and Pureit. The products are available in over seven million outlets acrossIndia.

In terms of market reach, HUL has almost 100 suppliers & associates, over 3,000 distributers and a broad market penetration through more than 2.4million stores.

In its latest quarterly results, the company has reported a growth of 11.1% at ₹92,340 million as against ₹83,090 million in same quarter previous year.The volume growth for the quarter stood healthy at 10% with better growth in rural market on back of improved demand. All the key businesssegments of the company has reported early double digits growth in the quarter.

The operating margins for the company stood 21.9% at ₹20,190 in Q2-FY19 as against 20.2% at ₹16,820 in Q2-FY18, an improvement of ~160 basispoints. The profit after tax margins for the company stood at 16.5% in the quarter as against 15.4% in same quarter previous year. The improvement inmargins are due to cost savings program undertaken by the company.

Over the medium term, HUL’s existing strategy and positioning through various of its program like WiMI, premiumize and up trade opportunity in variousof its product categories seems to be paying off well and is also expected to deliver favourable returns in future.

With most of macro, fiscal disruptions over and FMCG market showing early signs of growth we expect tailwinds like upcoming elections, lowercommodity prices, favourable exchange rates, higher MSP to add to the volume growth as well as value growth for the companies.

With HUL being largest FMCG company with one of the largest footprint in terms of products and distribution network and its strategy to target volumegrowth primarily should drive health growth in medium term. The company has also entered into health drinks segment with proposed amalgamation ofGSK Consumer business which we believe is value neutral while earnings accretive for HUL at current ratio. The deal at completion could add tentativelyaround ₹4 in HUL’s EPS on post dilution shares.

We initiate our coverage on Hindustan Unilever Limited (HUVR/HUL) with a BUY rating and a target price of ₹2,250 per share.

HUL: A bellwether player in its industry.

Hindustan Unilever Limited (HUVR)

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History and Key Milestones

Source: Company, Anand Rathi Research

Year Key historic Milestone

1888 Sunlight soap introduced in India.

1895 Lifebuoy soap launched; Lever Brothers appoints agents in Mumbai, Chennai, Kolkata and Karachi.

1902 Pears soap introduced in India.

1903 Brooke Bond Red Label tea launched.

1905 Lux soap and Lux flakes introduced.

1913 Vim scouring powder introduced.

1914 Vinolia soap launched in India.

1918 Vanaspati introduced by Dutch margarine manufacturers like Van den Berghs, Jurgens, Verschure Creameries, and Hartogs.

1922 Rinso soap powder introduced.

1924 Gibbs dental preparations launched.

1925 Lever Brothers gets full control of North West Soap Company.

1926 Hartogs registers Dalda Trademark.

1930 Unilever is formed on January 1st through merger of Lever Brothers and Margarine Unie.

1931 Hindustan Vanaspati Manufacturing Company registered on November 27th; Sewri factory site bought.

1932 Vanaspati manufacture starts at Sewri.

1933 Application made for setting up soap factory at Sewri; Lever Brothers India Limited incorporated.

1934Soap manufacture begins at Sewri factory; North West Soap Company's Garden Reach Factory, Kolkata rented and expanded to produce Lever brands.

1935 United Traders incorporated on May 11 to market Personal Products.

1939 Garden Reach Factory purchased outright; concentration on building up Dalda Vanaspati as a brand.

1941 Agencies in Mumbai, Chennai, Kolkata and Karachi taken over; Company acquires own sales force.

1943 Personal Products manufacture begins in India at Garden Reach Factory.

1947 Pond's Cold Cream launched.

1956 Three companies merge to form Hindustan Unilever Limited, with 10% Indian equity participation.

1958 Research Unit starts functioning at Mumbai Factory.

1959 Surf launched.

1962 Formal Exports Department starts.

1964 Etah dairy set up, Anik ghee launched; Animal feeds plant at Ghaziabad; Sunsilk shampoo launched.

Hindustan Unilever Limited (HUVR)

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…Contd.

Source: Company, Anand Rathi Research

Year Key historic Milestone

1965 Signal toothpaste launched; Indian shareholding increases to 14%.

1966 Lever's baby food, more new foods introduced; Nickel catalyst production begins; Indian shareholding increases to 15%.

Taj Mahal tea launched.

1969 Rin bar launched; Fine Chemicals Unit starts production; Bru coffee launched.

1971 Clinic shampoo launched.

1974 Pilot plant for industrial chemicals at Taloja; Liril marketed.

1975 Close-up toothpaste launched.

1976 Construction work of Haldia chemicals complex begins; Taloja chemicals unit begins functioning.

1978 Indian shareholding increases to 34%; Fair & Lovely skin cream launched.

1984 Foods, Animal Feeds businesses transferred to Lipton.

1986 Agri-products unit at Hyderabad starts functioning - first range of hybrid seeds comes out.

Khamgaon Soaps unit and Yavatmal Personal Products unit start production.

1988 Launch of Lipton Taaza tea.

1991 Surf Ultra detergent launched.

1993 The erstwhile Brooke Bond India acquires the Kissan brand from the United Breweries Group.

1994 Tata Oil Mills Company (TOMCO), merges with the company, the biggest such in Indian industry till that time.

HUL forms Unilever Nepal Limited

HUL & Kimberley-Clark Corporation form 50:50 JV - Kimberley-Clark Lever Ltd. - to market Huggies diapers & Kotex products.

HUL acquires Kwality and Milkfood 100% brandnames and distribution assets. HUL introduces Wall's.

1995 HUL enters branded staples business with salt.

1996 HUL and Indian cosmetics major, Lakme Ltd., form 50:50 joint venture - Lakme Lever Ltd

1998 HUL acquires Lakme brand, factories and Lakme Ltd.'s 50% equity in Lakme Lever Ltd.

2000 HUL acquires 74% stake in Modern Food Industries Ltd

2002 HUL enters Ayurvedic health & beauty centre category with the Ayush range and Ayush Therapy Centres.

2008 Pureit launched across India.

2016 Sales of six HUL brands; Surf excel, Brooke Bond, Wheel, Lifebuoy, Rin and Fair & Lovely cross the ₹2,000 crore mark.

Surf excel crosses the 3000 crore mark.

Hindustan Unilever Limited (HUVR)

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5 Anand Rathi Research

Revenue growth has been increasing with steady margins in past.

Source: Company, Anand Rathi Research

Revenue & Revenue Growth (₹ Mn.) EBITDA & EBITDA margin

HUL’s revenue has registered a CAGR of 5% in latest five years, the growth was marginal in FY-16 to FY-17 due to impact of

demonetisation followed by GST implementation which led to overall slowdown in FMCG sector. However, in FY-18 the growth

has come back moderately and has since strengthened the momentum in current financial year.

For the H1-FY19, HUL has reported a growth of 11.2% in its revenues of which volume growth was around 11% for the period.

In terms of profitability, the company has consistently improved its operating margins in last five years. The total margins

improvement for the company for the period was ~490 basis points despite facing challenges in revenue growth in few years

impacted by fiscal policy decisions. The improvement in margins was mainly due to improvement in overall efficiency of the

company. FY-18 was the seventh consecutive year of margins improvement.

2,00,000

2,75,000

3,50,000

4,25,000

FY-14 FY-15 FY-16 FY-17 FY-18

10%

15%

20%

25%

30%

20,000

35,000

50,000

65,000

80,000

FY-14 FY-15 FY-16 FY-17 FY-18

EBITDA (₹ Mn.) EBITDA Margins (RHS)

Hindustan Unilever Limited (HUVR)

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6 Anand Rathi Research

Business Segments & Key Brands

Source: Company, Anand Rathi Research

HUL Business Segments

Others (~2%)Home Care (33%)

• Detergents• Floor Cleaners• Kitchen Cleaners• Fabric

Conditioners

• Infant Care• Famine Care• Exports

Foods & Refreshment (18%)

• Tea & Coffee• Cold Beverages• Ice Creams• Jams, Ketchup• Salts & Atta

Beauty & Personal Care (47%)

• Bathing Soaps• Shampoo• Deodorants• Toothpaste• Skincare Cream• Hair Care

Hindustan Unilever Limited (HUVR)

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Segment wise performance

Source: Company, Anand Rathi Research

Home care Segment Beauty & Personal Care Segment

In terms business segments, HUL’s business is driven primarily by four segments Home Care, Beauty & Personal Care, Foods &

Refreshments and Others which contribute 33%, 47%, 18% and 2% respectively to the revenues.

Home Care business of HUL comprises of products used primarily for home utility purpose like floor cleaners (Domex), kitchen

cleaners (Vim), fabric conditioners (Comfort), detergents (Surf Excel, Rin, Sunlight). The company currently has eight brands in

this portfolio with multiple product extensions for each brand.

In Beauty & Personal Care business the company offers products targeted to individual use like bathing soap (Pears, Dove, Lux,

Lifebuoy, etc.), Shampoo (Sunsilk, ClinicPlus) , deodorants (Axe, Ponds), toothpaste (Closeup, Pepsodent), skincare (Lakme,

Vaseline, Fair & Lovely), haircare (Brylcreem) etc.

-5%

2%

9%

16%

23%

15,000

20,000

25,000

30,000

35,000

Sales (₹ Mn.) Growth YoY (RHS)

-5%

0%

5%

10%

15%

35,000

37,500

40,000

42,500

45,000

Sales (₹ Mn.) Growth % (RHS)

Hindustan Unilever Limited (HUVR)

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8 Anand Rathi Research

… contd.

Source: Company, Anand Rathi Research

Foods & Refreshment Segment Others Segment

The Foods & Refreshment business of the company caters to products like Tea & Coffee (Lipton, Bru, Red Label, Taj), Cold

Beverages, Ice Creams (Cornetto, KwalityWall’s, Magnum), Jams (Kissan), Ketchup (Kissan), Salts & Atta (Annapurna).

The others business of the company includes products for Infant (Baby Dove) & Feminine Care along with exports by the

company.

In terms of growth, all the top three segments of the company have witnessed growth over in early double digits for the latest

quarter ended Sep-18 while Others segment contributing around 2% grew 4.7%. The overall blended volume growth for the

company during the quarter stood at 10%.

The company has witnessed revival in growth in Sep-18 quarter which was mainly due to better growth in rural market on back

of improved demand coupled with tailwinds like good monsoon, increase in MSP which added to the growth.

3%

6%

9%

12%

15%

10,000

12,000

14,000

16,000

18,000

Sales (₹ Mn.) Growth % (RHS)

-50%

-32%

-14%

4%

22%

-

600

1,200

1,800

2,400

Sales (₹ Mn.) Growth % (RHS)

Hindustan Unilever Limited (HUVR)

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Segment wise volume and margins

Source: Company, Anand Rathi Research

Segment EBIT margins

Over the last ten quarters, the volume growth for the company has bounced back to health early double digits post

events like demonetization and GST implementation. The growth mix was rural markets driven with a value growth

multiple of around 1.3 times urban growth.

In terms of profitability, the Beauty & Personal Care segment continues to be largest segment in terms of contribution

to revenues as well as in terms of margins. The EBIT margins for this segment stood at 26% in Sep-18 quarter. This is on

back of greater premiumization witnessed in the segment as compared to other segments.

While the other two larger segments Home Care and Food & Refreshments continues to report EBIT margins in mid

teens.

-10%

0%

10%

20%

30%

Home Care Beauty & Personal Care

Foods & Refreshment Others

-5%

0%

5%

10%

15%

Standalone Volume Growth

Hindustan Unilever Limited (HUVR)

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The Strategy,

Source: Company, Anand Rathi Research

To be competitive in the FMCG sector the companies have to have an evolving approach towards markets and HUL is current undergoing such initiative.

The company has undertaken a broad strategy of re-imaging itself in the Indian market with seven key areas under the initiative.

These includes differentiated approach towards the structure of the markets in terms of demographics, affluence, habits and category. The company

thus has a Winning in Many India (WiMI) strategy to focus on these aspects.

In terms of portfolio, the company is focusing on driving penetration and distribution and not only targeting opportunities to premiumize and up trade

but also constantly innovating and renovating the core portfolio of products.

Coming to the trade channels and value chain, the company is also focusing on improving throughput in its existing channels and also has started

building future channels of modern trade like E-commerce ets.

Hindustan Unilever Limited (HUVR)

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The outcome

HUL’s ongoing re-imaging strategy has so far shown favourable

results in last two years.

The company’s various business operating matrix have shown

improvement in terms of speed, coverage of the market along

with better operational matrix in terms of lower inventory days,

better net working capital and well placed capital reserves to

undertake faster inorganic growth.

Source: Company, Anand Rathi Research

Hindustan Unilever Limited (HUVR)

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The Industry

Source: Company, Anand Rathi Research

FMCG Industry Structure

Food Products (19%)

• Dairy products• Tea/coffee• Sugar• Vegetable oils• Bakery products• Confectionery• Processed foods• Branded flour, etc.

Household & Personal Care (50%)

• Oral care, skin care• Soaps & Detergents• Tooth powder• Hair Shampoo• Toothpaste• Hair oil,• Creams & lotions• Agarbattis,• Fragrances &

essentional oils, etc.

Healthcare (31%)

• Over the counter (OTC) products & ethicals

Hindustan Unilever Limited (HUVR)

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Revenue growth has been increasing with steady margins in past.

Source: Company, CII Bain;2017, Anand Rathi Research

Per Capita FMCG Consumption FMCG Spending per capita (US$ 2016)

FMCG industry is the fourth largest sector in the Indian economy and provides employment to around 3 million people. Over the years, India FMCG

sector has been growing at a healthy pace on account of growing disposable income, booming youth population and increasing brand consciousness

among consumers.

This demand is shaped by factors such as, noticeable shift in demographics with rising income middle class, rise in number of smaller towns entering

consumption. There is high attention on the affluent and elite households in India, but the major focus has been in metros, state capitals and larger

towns. There is a strong and growing market in the next tier of towns with population of less than 1 million. It is estimated that these 600 towns will add

another 30% of elite/affluent households. (Source: FMCG Sector Growth & Logistc Innovaton; Assocham).

In terms of per capita FMCG consumption India stands lowest within its developing country peers at just around US$29 as against Indonesia which

amounts to almost double while China at four times India’s consumption.

Historically, if we look at the FMCG spending per capita for the world, we can conclude that FMCG growth follows an S-curve; India is at the cusp and has

significant room to grow in the next 5 to 10 years.

-

300

600

900

1,200

India Indonesia China Philippines

2x

4x

5x

1x

Hindustan Unilever Limited (HUVR)

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Rural is showing faster growth than urban markets lately.

Source: Company, CII, BCG, IBEF, TRA, Anand Rathi Research

FMCG Sector Industry Break-up (2017-18) Existing and Future trends for the Industry

Urban segment is the largest contributor to the overall revenue generated by the FMCG sector in India. However, Rural segment is growing

at a rapid pace and accounted for a revenue share of 45% in the overall revenues recorded by FMCG sector in India. FMCG products account

for 50% of total rural spending.

As reported by the major companies in India in the last few years, the FMCG market has grown at a faster pace in rural India compared with

urban India. In 2018-19, revenues from the rural segment are expected to grow 15-16 per cent outpacing its urban peers by more than 700

basis points.

Urban55%

Rural45%

Current Forecast

• FMCG marketreached US$ 52.75billion in FY18.

• The rural FMCGmarket reached US$23.63 billion in FY18.

• The online FMCGmarket reached US$20 billion in 2017.

• FMCG market isexpected reach US$103.7 billion by 2020.

• The rural market isexpected to grow toUS$ 220 billion by2025.

• The online FMCGmarket is forecastedto reach US$ 45billion in 2020.

Hindustan Unilever Limited (HUVR)

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15 Anand Rathi Research

The way forward

Source: Company, Anand Rathi Research

With broad fundamentals looking better for the overall FMCG sector in India, we believe there are also some rural

specific factors which looks positive for the medium term.

The overall good monsoon, higher MSP and upcoming elections for states and central government could provide

tailwinds to the existing growth momentum.

The decline in macro commodities like crude oil, palm oil and stable currency should also add to the favourable factors

for the sector and the companies in terms of margins.

Hindustan Unilever Limited (HUVR)

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16 Anand Rathi Research

We expect growth to maintain momentum of latest quarter along with gradual improvement margins.

Revenue estimates (₹ Mn.)

We expect HUL to grow at a CAGR of 13.5% in next two years. We estimate the company to report revenues of

₹401,280 million in FY-19E and ₹457,561 million in FY-20.

The operating margins for the company should continue to improve with our estimate of around 120 basis points

over two years. We expect company’s EBITDA margins to be around 21.8% in FY-19E and 22.3% in FY-20E.

Source: Company, Anand Rathi Research

EBITDA & EBITDA margin estimates

10%

15%

20%

25%

30%

30,000

50,000

70,000

90,000

1,10,000

FY-17 FY-18 FY-19E FY-20E

EBITDA (₹ Mn.) EBITDA Margins (RHS)

2,00,000

2,75,000

3,50,000

4,25,000

5,00,000

FY-17 FY-18 FY-19E FY-20E

Hindustan Unilever Limited (HUVR)

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17 Anand Rathi Research

With factors such as, noticeable shift in demographics

with rising income middle class, rise in number of smaller

towns entering consumption.

The FMCG industry is a strong and growing market in the

next tier of towns with population of less than 1 million. It

is estimated that these 600 towns will add another 30% of

elite/affluent households.

HUL being largest FMCG company with one of the largest

footprint in terms of products and distribution network

and its strategy to target volume growth primarily should

drive health growth in medium term.

At CMP the stock is trading at 62x times FY19E and 53x FY-

20E consolidated earnings.

We initiate our coverage on Hindustan Unilever Limited

(HUVR) with a BUY rating and a target price of ₹2,250 per

share.

Relative stock performance (Dec’17=100)

Valuation and Recommendation:

Source: Bloomberg, Anand Rathi Research

Source: Company, Anand Rathi Research

(In ₹ mn) FY-17 FY-18 FY-19E FY-20E

EPS (₹) 20.7 24.1 29.4 34.3

P/E (x) 88.8 76.2 62.4 53.5

P/B (x) 58.9 54.6 50.7 45.7

ROE 66.4% 71.6% 81.2% 85.4%

ROCE 83.1% 84.5% 96.7% 103.1%

EV/EBIDTA (x) 59.4 50.4 42.1 36.2

Hindustan Unilever Limited (HUVR)

80

100

120

140

160

Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

Nifty 500 HUVR

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18 Anand Rathi Research

Margins FY-17 FY-18 FY-19E FY-20E

Sales Growth % 2.9% 6.9% 12.9% 14.0%

Operating Margin % 19.0% 21.1% 21.8% 22.3%

Net Margin % 13.5% 14.7% 15.9% 16.2%

Consolidated Financials:

Source: Company, Anand Rathi Research

(In ₹ Mn.) FY-17 FY-18 FY-19E FY-20E

Liabilities

Equity Share Capital 2,450 2,450 2,450 2,450

Reserves & Surplus 64,990 70,360 75,919 84,489

Total Shareholder's Funds 67,440 72,810 78,369 86,939

Minority Interest 220 200 200 200

Long-Term Liabilities - - - -

Other Long-term Liabilities 12,260 16,740 16,740 16,740

Deferred Tax Liability (1,700) (3,020) (3,020) (3,020)

Short-term Liabilities 77,140 88,870 1,00,314 1,14,384

Total 1,55,360 1,75,600 1,92,603 2,15,243

Assets

Net Fixed Assets 46,690 50,050 51,438 54,587

Long-Term L&A 7,080 9,070 9,070 9,070

Non Current Investments 60 20 20 20

Other Non-Current Assets 20 20 20 20

Current Asset 1,01,510 1,16,440 1,32,055 1,51,547

Total 1,55,360 1,75,600 1,92,603 2,15,243

(In ₹ Mn.) FY-17 FY-18 FY-19E FY-20E

Net Sales 3,32,520 3,55,500 4,01,280 4,57,561

Operating Expense 2,69,250 2,80,490 3,13,960 3,55,707

EBITDA 63,270 75,010 87,319 1,01,854

Other Income 3,690 3,840 7,022 8,007

Depreciation 4,320 5,200 5,136 5,857

EBIT 62,640 73,650 89,205 1,04,004

Interest 350 260 253 253

Misc. items 2,370 (330) - -

PBT 64,660 73,060 88,952 1,03,752

Tax 19,760 20,790 25,312 29,524

Minority Interest (140) (130) - -

PAT 44,760 52,140 63,640 74,228

Hindustan Unilever Limited (HUVR)

NOTE: HUL-GSK-CH amalgamation has been announced today. Our financials does not include GSK-CH financials as deal is pending shareholder approval.

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19 Anand Rathi Research

The company’s business is exposed to palm oil price risks. Any significant rise could lower margins from expectations.

The company’s business is indirectly exposed to overall economic factors like inflation, interest rates and forex rates.

Any significant adverse volatility could lower revenue growth than estimated.

Key Risks:

Hindustan Unilever Limited (HUVR)

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20 Anand Rathi Research

Rating and Target Price history:

Date Rating Target Price (₹) Share Price (₹)

03-Dec-18 BUY 2,250 1,836

APNT rating detailsAPNT rating history & price chart

Source: Bloomberg, Anand Rathi Research Source: Bloomberg, Anand Rathi Research

NOTE: Prices are as on 3 December 2018 close.

Hindustan Unilever Limited (HUVR)

80

100

120

140

160

Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

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21 Anand Rathi Research

Disclaimer:

Research Disclaimer and Disclosure inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, 2014

Anand Rathi Share and Stock Brokers Ltd. (hereinafter refer as ARSSBL) (Research Entity, SEBI Regn No. INH000000834, Date of Regn. 29/06/2015) is a subsidiary of the

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is engaged into the business of Stock Broking, Depository Participant, Mutual Fund distributor.

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon

various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues.

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constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. The

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aspects of any potential investment.

Continued…

Hindustan Unilever Limited (HUVR)

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22 Anand Rathi Research

Disclaimer:

Contd…

Opinions expressed are our current opinions as of the date appearing on this Research only. We do not undertake to advise you as to any change of our views expressed in this Report. Research Report may differ between ARSSBL’s RAs and/ or ARSSBL’s associate companies on account of differences in research methodology, personal judgment and difference in time horizons for which recommendations are made. User should keep this risk in mind and not hold ARSSBL, its employees and associates responsible for any losses, damages of any type whatsoever.

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Copyright: - This report is strictly confidential and is being furnished to you solely for your information. All material presented in this report, unless specifically indicated otherwise, is under copyright to ARSSBL. None of the material, its content, or any copy of such material or content, may be altered in any way, transmitted, copied or reproduced (in whole or in part) or redistributed in any form to any other party, without the prior express written permission of ARSSBL. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of ARSSBL or its affiliates, unless specifically mentioned otherwise.

Contd…

Hindustan Unilever Limited (HUVR)

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23 Anand Rathi Research

Disclaimer:

Contd.

Statements on ownership and material conflicts of interest, compensation - ARSSBL and Associates

Sr. No.

Statement

Answers to the Best of the knowledgeand belief of the ARSSBL/ itsAssociates/ Research Analyst who ispreparing this report

1ARSSBL/its Associates/ Research Analyst/ his Relative have any financial interest in the subject company? Nature of Interest (if applicable), is givenagainst the company’s name?. NO

2

ARSSBL/its Associates/ Research Analyst/ his Relative have actual/beneficial ownership of one per cent or more securities of the subject company, at theend of the month immediately preceding the date of publication of the research report or date of the public appearance?. NO

3ARSSBL/its Associates/ Research Analyst/ his Relative have any other material conflict of interest at the time of publication of the research report or atthe time of public appearance?. NO

4 ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation from the subject company in the past twelve months. NO

5ARSSBL/its Associates/ Research Analyst/ his Relative have managed or co-managed public offering of securities for the subject company in the pasttwelve months.

NO

6ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation for investment banking or merchant banking or brokerageservices from the subject company in the past twelve months. NO

7

ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation for products or services other than investment banking ormerchant banking or brokerage services from the subject company in the past twelve months. NO

8ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation or other benefits from the subject company or third party inconnection with the research report. NO

9 ARSSBL/its Associates/ Research Analyst/ his Relative have served as an officer, director or employee of the subject company. NO

10 ARSSBL/its Associates/ Research Analyst/ his Relative has been engaged in market making activity for the subject company. NO

Hindustan Unilever Limited (HUVR)