RESULTS REVIEW 4QFY19 04 MAY 2019

Hindustan Unilever NEUTRAL

HDFC securities Institutional Research is also available on Bloomberg HSLB & Thomson Reuters

Maintains growth leadership HUL reported a healthy quarter (in-line) in the context of challenging macros. Notwithstanding its scale, HUL maintained growth leadership over the last 6 quarters (10% volume growth) led by strong product portfolio and remarkable execution. We continue to maintain our NEUTRAL rating since we downgraded in Jul-18 (stock is flat since then) as we don’t see any near-term trigger. We value HUL at 45x on FY21 EPS arriving at a TP of Rs 1,804. HIGHLIGHTS OF THE QUARTER Domestic revenue/volume grew at 9/7% (12/10% in

FY19) vs. our exp of 10/7.5%. The sector growth has moderated owing to tapering of rural growth (Currently 1x vs. urban growth as compared to 1.2-1.3x in CY18). We believe the slowdown in rural demand is momentary as (a) Trade channel is normalizing inventory to factor weaker than expected liquidity prior to elections (unlike previous elections) and (b) Govt. will focus on healing rural stress (farm incomes). HUL maintains positive outlook in the medium term.

Home Care maintained healthy performance at +13/22% Rev./EBIT growth. Laundry growth is driven by its premium portfolio and WiMi strategy. Beauty & PC (BPC) growth (+7/14% Rev./EBIT growth) was impacted by cleansing products (particularly Lux and

Lifebuoy, >20% combined revenue mix in BPC), ex-cleansing the segment grew in double digits. HUL will go back to the drawing board to fix slowdown in these brands (price action). F&R growth (+9/21% Rev./EBIT growth) was driven by Red Label campaigns and innovations in Ice cream & frozen desserts.

GM declined by 27bps owing to limited price hikes. Cost savings program, premiumisation and operating leverage drove EBITDAM (+83bps vs. exp. of 110bps) to 23.3% (30 qtrs of expansion in the last 31qtrs). We model EBITDAM expansion of 90bps (vs. 350bps over FY17-19) over FY19-21E as we believe there will be moderation in cost savings drive.

STANCE In 2017, our upgrade on HUL was led by the rationale that the company will outperform its peers during a challenging environment. After a 70% run-up in the stock (post our upgrade), we downgraded HUL as we believed that the stock priced in all the near term positives and hence everything had to go right (which didn’t). We maintain our NEUTRAL rating, which may change with (a) Further time correction in the stock, (b) Recovery in rural demand and (c) Successful integration of GSK portfolio (ability to surprise on margin expansion).

Financial Summary YE March (Rs mn) 4QFY19 4QFY18 YoY (%) 3QFY19 QoQ (%) FY17 FY18 FY19P FY20E FY21E Net Revenues 99,450 90,970 9.3 95,580 4.0 331,620 355,450 393,100 452,117 552,064 EBITDA 23,210 20,480 13.3 20,460 13.4 63,400 74,990 88,808 105,104 133,778 APAT 15,900 14,090 12.8 14,010 13.5 19,770 20,790 25,440 31,527 39,919 Diluted EPS (Rs) 7.3 6.5 12.8 6.5 13.5 19.7 23.8 27.7 33.4 40.7 P/E (x) 86.1 71.2 61.2 50.8 41.6 EV / EBITDA (x) 56.9 47.9 40.4 36.9 28.8 Core RoCE (%) 53.6 64.0 67.6 28.4 21.9

Source: Company, HDFC sec Inst Research

INDUSTRY FMCG CMP (as on 03 May 2019) Rs 1,693 Target Price Rs 1,804 Nifty 11,712 Sensex 38,963 KEY STOCK DATA Bloomberg HUVR IN No. of Shares (mn) 2,165 MCap (Rs bn) / ($ mn) 3,664/52,873 6m avg traded value (Rs mn) 2,820 STOCK PERFORMANCE (%) 52 Week high / low Rs 1,871/1,442 3M 6M 12M Absolute (%) (5.9) 3.3 16.6 Relative (%) (12.8) (8.0) 5.6 SHAREHOLDING PATTERN (%) Dec-18 Mar-19 Promoters 67.19 67.19 FIs & Local MFs 7.44 7.03 FPIs 19.40 18.86 Public & Others 1.45 2.12 Pledged Shares 0.00 0.00 Source : BSE

Naveen Trivedi naveen.trivedi@hdfcsec.com +91-22-6171-7324

Siddhant Chhabria siddhant.chhabria@hdfcsec.com +91-22-6171-7336

HUL: RESULTS REVIEW 4QFY19

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Quarterly Financials (Standalone) Particulars (Rs mn) 4QFY19 4QFY18 YoY (%) 3QFY19 QoQ (%) FY19 FY18 YoY (%) Net Sales 98,090 90,030 9.0 93,570 4.8 376,600 339,260 11.9 Other Operating Income 1,360 940 44.7 2,010 (32.3) 5,640 5,990 (5.8) Total Income 99,450 90,970 9.3 95,580 4.0 382,240 345,250 10.7 Material Expenses 47,430 43,140 9.9 44,180 7.4 179,600 162,320 10.6 Employee Expenses 4,020 4,000 0.5 4,650 (13.5) 17,470 17,450 0.1 ASP 11,070 10,700 3.5 11,860 (6.7) 45,520 41,050 10.9 Other Operating Expenses 13,720 12,650 8.5 14,430 (4.9) 53,280 51,670 3.1 EBITDA 23,210 20,480 13.3 20,460 13.4 86,370 72,760 18.7 Depreciation 1,340 1,280 4.7 1,326 1.1 5,236 4,780 9.5 EBIT 21,870 19,200 13.9 19,134 14.3 81,134 67,980 19.3 Other Income 1,180 1,000 18.0 1,060 11.3 6,640 5,690 16.7 Interest Cost 70 40 75.0 70 - 280 215 30.2 PBT 22,980 20,160 14.0 20,124 14.2 87,494 73,455 19.1 Exceptional (710) (640) na (620) na (2,270) (620) na PBT (after exceptional) 22,270 19,520 14.1 19,504 14.2 85,224 72,835 17.0 Tax 6,890 6,010 14.6 5,060 36.2 25,650 22,100 16.1 RPAT 15,380 13,510 13.8 14,444 6.5 60,364 52,355 15.3 APAT 15,900 14,090 12.8 14,010 13.5 60,800 51,350 18.4 EPS (Adjusted) 7.3 6.5 12.8 6.5 13.5 28.1 23.7 18.4 As % Of Net Revenue 4QFY19 4QFY18 YoY (bps) 3QFY19 QoQ (bps) FY19 FY18 YoY (bps) Material Expenses 47.7 47.4 27 46.2 147 47.0 47.0 (3) Employee Expenses 4.0 4.4 (35) 4.9 (82) 4.6 5.1 (48) ASP Expenses 11.1 11.8 (63) 12.4 (128) 11.9 11.9 2 Other Operating Expenses 13.8 13.9 (11) 15.1 (130) 13.9 15.0 (103) EBITDA Margin (%) 23.3 22.5 83 21.4 193 22.6 21.1 130 Tax Rate (%) 30.9 30.8 15 25.9 500 30.1 30.3 (25) APAT Margin (%) 16.0 15.5 50 14.7 133 15.9 14.9 103 Source: Company, HDFC sec Inst Research Note: *Like-like (GST impact)

9% revenue growth was driven by 7% volume growth Stringent cost control led to employee/ASP/other expenses growing by 0.5/3.5/8.5%. Gross margins declined by 27bps owing to delay in price hike EBITDAM expansion was driven by richer mix and cost savings Exceptional item was due to deferred consideration payable on account of Indulekha acquisition (growth was higher than expected by management)

HUL: RESULTS REVIEW 4QFY19

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Quarterly Segmental (Standalone) Year to March (Rs mn) 4QFY19 4QFY18 YoY (%) 3QFY19 QoQ (%) FY19 FY18 YoY (%) Segmental Revenues Home Care 35,020 31,020 12.9 31,480 11.2 128,760 116,290 15.0 Beauty & PC 43,930 40,960 7.3 45,390 (3.2) 176,550 164,640 10.7 Foods & Refreshment 19,160 17,350 10.4 17,280 10.9 71,330 64,410 11.5 Others 1,340 1,640 (18.3) 1,430 (6.3) 5,600 6,230 (6.0) Total 99,450 90,970 9.3 95,580 4.0 382,240 351,570 12.0 Segmental EBIT Home Care 6,190 5,090 21.6 4,040 53.2 21,170 16,940 25.0 Beauty & PC 12,200 10,660 14.4 11,620 5.0 46,590 41,000 13.6 Foods & Refreshment 3,460 2,870 20.6 2,440 41.8 12,120 9,850 23.0 Others 20 20 - (30) (166.7) (10) (120) (91.7) Total 21,870 18,640 17.3 18,070 21.0 79,870 67,670 18.0 (a) Interest Cost & Bank Charges 70 40 75.0 70 - 280 210 33.3 (b) Other Un-allocable Expenses 20 20 - (30) (166.7) (6,340) (5,380) 17.8 PBT 22,980 19,520 17.7 19,500 17.8 85,930 72,840 18.0 Capital Employed Home Care (4,820) (7,650) na (10,300) na (4,820) (7,650) na Beauty & PC (2,200) 13 na (6,080) na (2,200) 13 na Foods & Refreshment 8,680 6,020 44.2 6,250 38.9 8,680 6,020 44.2 Others 770 640 20.3 520 48.1 770 640 20.3 Total 2,430 (977) na (9,610) na 2,430 (977) (348.7) Unallocable Capital Employed 74,160 71,610 3.6 70,850 4.7 74,160 71,610 3.6 Total Capital Employed 76,590 70,633 8.4 61,240 25.1 76,590 70,633 8.4 Source: Company, HDFC sec Inst Research EBIT Margin EBIT Margin 4QFY19 4QFY18 YoY (bps) 3QFY19 QoQ (bps) FY19 FY18 YoY (bps) Home Care 17.7 16.4 127 12.8 484 16.4 14.6 187 Beauty & PC 27.8 26.0 175 25.6 217 26.4 24.9 149 Foods & Refreshment 18.1 16.5 152 14.1 394 17.0 15.3 170 Others 1.5 1.2 na (2.1) na (0.2) (1.9) na Total 22.0 20.5 150 18.9 309 20.9 19.2 165 Source: Company, HDFC sec Inst Research

Home care growth was driven by double digit volume growth HUL increased penetration of dish wash bars in rural markets while focused on upgrading urban consumers to liquids Home Care EBIT margins expanded by 127bps owing to premiumisation Beauty & PC growth was slight slow owing to continued challenges in oral care and softer growth for soaps (Lux & Lifebuoy) F&R continue healthy performance both on revenue and margin

HUL: RESULTS REVIEW 4QFY19

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Net Revenue Growth Underlying Volume Growth

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research EBITDA APAT

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

HUL’s revenue growth in the last 2 quarters has been primarily driven by volume growth EBITDAM expansion is driven by premiumisation and cost savings

4 4 1

(1)

6 5

10

17 16 16

11 11 9

(3)

-

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6

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12

15

18

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10.0

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16.0

19.0

22.0

25.0

-

4,000

8,000

12,000

16,000

20,000

24,000

28,000

Q4F

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%Rs mn

8.0

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16.0

18.0

6,000

8,000

10,000

12,000

14,000

16,000

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APAT NPM (%) - RHS%Rs mn

HUL: RESULTS REVIEW 4QFY19

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A&P Personal Care Performance

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research Home Care Performance Foods & Refreshment Performance

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

HUL has rationalised A&P spends in the last 2 quarters (growing slower than volume growth) GST led price-cuts (>800 SKUs benefited) are aiding in driving growth for premium products Only 1 in 10 washes arise from premium detergent providing significant scope for premiumisation

10.00

11.00

12.00

13.00

14.00

6,000

7,000

8,000

9,000

10,000

11,000

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A&P A&P (%) of sales - RHS

%Rs mn

20.0

22.0

24.0

26.0

28.0

30.0

34,000

36,000

38,000

40,000

42,000

44,000

46,000

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Revenue EBIT Margin - RHS

%Rs mn

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

20,500

22,500

24,500

26,500

28,500

30,500

32,500

34,500

36,500

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Revenue EBIT Margin - RHS

%Rs mn

-

4.0

8.0

12.0

16.0

20.0

8,000

10,000

12,000

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HUL: RESULTS REVIEW 4QFY19

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Personal Care Performance Particulars (Rs mn) Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Revenue 40,280 39,802 40,750 43,680 39,100 40,900 40,960 44,070 43,160 45,390 43,930 YoY Gr. (%) -0.3% -2.7% 8.1% 3.5% 8.0% 20.0% 13.0% 14.0% 10.4% 11.0% 7.3% Revenue Mix (%) 47.6% 47.9% 45.9% 47.4% 47.1% 47.6% 45.0% 46.5% 46.7% 47.5% 44.2% EBIT 9,226 9,208 9,840 10,790 9,480 10,070 10,660 11,620 11,150 11,620 12,200 YoY Gr. (%) 3.6% -7.1% 9.0% 5.7% 2.8% 9.4% 8.3% 7.7% 17.6% 15.4% 14.4% EBIT Margin (%) 22.9% 23.1% 24.1% 24.7% 24.2% 24.6% 26.0% 26.4% 25.8% 25.6% 27.8% EBIT Mix (%) 66.0% 68.9% 60.9% 59.4% 60.9% 65.8% 57.2% 55.4% 58.8% 64.3% 55.8% Note: Like-to-like revenue growth for 2QFY18-1QFY19

Home Care Performance Particulars (Rs mn) Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Revenue 27,770 26,891 30,040 30,470 27,390 27,410 31,020 31,460 30,800 31,480 35,020 YoY Gr. (%) 3.2% 1.0% 7.4% 5.9% 13.0% 17.0% 21.0% 20.0% 12.4% 14.8% 12.9% Revenue Mix (%) 32.8% 32.4% 33.8% 33.1% 33.0% 31.9% 34.1% 33.2% 33.4% 32.9% 35.2% EBIT 2,800 2,342 3,890 4,480 3,830 3,540 5,090 6,020 4,920 4,040 6,190 YoY Gr. (%) 24.7% -0.6% 28.8% 25.8% 36.8% 51.1% 30.8% 34.4% 28.5% 14.1% 21.6% EBIT Margin (%) 10.1% 8.7% 12.9% 14.7% 14.0% 12.9% 16.4% 19.1% 16.0% 12.8% 17.7% EBIT Mix (%) 20.0% 17.5% 24.1% 24.7% 24.6% 23.1% 27.3% 28.7% 25.9% 22.4% 28.3% Note: Like-to-like revenue growth for 2QFY18-1QFY19

Foods & Refreshment Performance Particulars (Rs mn) Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Revenue 14,470 14,426 15,950 16,540 15,260 15,720 17,350 17,850 17,040 17,280 19,160 YoY Gr. (%) 5.4% 4.3% 6.5% 12.0% 10.5% 15.5% 12.0% 14.0% 11.7% 9.9% 10.4% Revenue Mix (%) 17.1% 17.4% 18.0% 18.0% 18.4% 18.3% 19.1% 18.8% 18.5% 18.1% 19.3% EBIT 1,863 1,974 2,470 2,950 2,310 1,720 2,870 3,340 2,880 2,440 3,460 YoY Gr. (%) 14.1% 1.5% 6.3% 41.1% 24.0% -12.9% 16.2% 13.2% 24.7% 41.9% 20.6% EBIT Margin (%) 12.9% 13.7% 15.5% 17.8% 15.1% 10.9% 16.5% 18.7% 16.9% 14.1% 18.1% EBIT Mix (%) 13.3% 14.8% 15.3% 16.2% 14.8% 11.2% 15.4% 15.9% 15.2% 13.5% 0.0% Note: Like-to-like revenue growth for 2QFY18-1QFY19 Source: Company, HDFC sec Inst Research

Premium mix in detergent rises by ~100bps annually for HUL HUL re-aligned strategy on water purifiers to premium devices (phasing out gravity segment) Foods & Refreshment growth was driven by ice-creams, beverages and foods (Kissan and Knorr)

HUL: RESULTS REVIEW 4QFY19

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Assumptions Particulars FY17 FY18 FY19 FY20E FY21E Revenue (Rs mn) Home Care 113,460 116,260 128,740 144,812 162,891 Beauty & PC 164,320 165,880 178,000 195,689 215,693 Foods 11,240 11,650 12,543 28,200 79,136 - HUL 11,240 11,650 12,543 14,299 16,303 - GSK na na na 13,901 62,834 Refreshment 48,480 53,110 58,767 66,334 74,956 Others (export, infant & feminine care) 19,600 15,330 15,050 17,082 19,388 Gross segment revenue 357,100 362,230 393,100 452,117 552,064 YoY Growth Home Care 5% 2% 15% 12% 12% Beauty & PC 2% 1% 11% 10% 10% Foods 3% 4% 12% 125% 181% - HUL 3% 4% 12% 14% 14% - GSK (underlying growth) na na na 13% 13% Refreshment 8% 10% 12% 13% 13% Others -5% -22% -6% 14% 14% Total 3% 1% 12% 15% 22% Total (Ex-GSK) 3% 1% 12% 11% 12% EBIT Margin Home Care 11.2% 14.6% 16.7% 16.9% 17.0% Beauty & PC 23.7% 25.3% 26.7% 27.2% 27.6% Foods 7.7% 8.5% 10.0% 19.2% 26.8% - HUL 7.7% 8.5% 10.0% 11.0% 12.0% - GSK na na na 27.5% 30.6% Refreshment 15.7% 16.9% 18.8% 19.5% 20.0% Others 10.2% 9.5% 11.8% 12.5% 13.5% Total 17.4% 19.5% 21.2% 21.7% 22.8% Gross Margin (%) 50.8 52.9 53.0 54.2 57.4 Employee (% of sales) 5.3 5.2 4.8 4.6 4.5 ASP (% of sales) 10.7 11.7 11.7 11.8 12.0 Distribution (% of sales) 4.6 4.4 4.1 4.1 4.1 Other Expenses (% of sales) 11.2 10.6 9.8 10.4 12.6 EBITDA Margin (%) 19.1 21.1 22.6 23.2 24.2 Tax Rate (%) 30.5 28.5 29.6 30.0 29.5 Source: Company, HDFC sec Inst Research | Note: FY18 revenue growth is like-like

HUL: RESULTS REVIEW 4QFY19

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Change in Estimates

FY19E FY20E FY21E

OLD NEW Chg (%) OLD NEW Chg (%) OLD NEW Chg (%) Net Sales 398,562 393,100 -1.4% 460,187 452,117 -1.8% 563,958 552,064 -2.1% EBITDA 89,539 88,808 -0.8% 106,539 105,104 -1.3% 136,739 133,778 -2.2% APAT 61,298 60,800 -0.8% 74,587 73,586 -1.3% 97,592 95,426 -2.2% EPS 28.4 28.1 -0.8% 33.8 33.4 -1.3% 41.6 40.7 -2.2% Source: HDFC sec Inst Research Peer Set Comparison

Companies MCap

(Rs bn)

CMP (Rs) Reco.

TP (Rs)

EPS (Rs) P/E (x) EV/EBITDA (x) Core RoCE (%)

FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E

ITC 3,728 306 BUY 394 10.2 11.3 12.4 29.9 27.1 24.6 18.8 16.9 15.1 38.1 38.6 40.1 HUL 3,664 1,693 NEU 1,804 28.1 33.4 40.7 60.2 50.8 41.6 40.4 36.9 28.8 68.3 28.3 21.9 Nestle 1,008 10,454 NR 11,225 176.3 210.5 249.4 59.3 49.7 41.9 34.5 29.5 25.3 78.0 100.1 136.7 Dabur 669 380 BUY 464 8.2 10.2 12.2 46.4 37.1 31.1 37.0 30.4 25.6 47.5 55.4 61.6 Britannia 647 2,696 NEU 3,101 48.1 56.6 68.9 56.1 47.7 39.1 36.6 30.3 24.9 39.2 41.4 46.1 Marico 459 355 BUY 402 7.2 9.7 11.5 49.0 36.6 30.9 35.3 26.8 23.0 41.4 53.3 60.0 Colgate 319 1,171 NEU 1,260 27.8 32.2 37.3 42.1 36.3 31.4 25.0 21.6 18.7 68.7 77.9 89.1 Emami 178 383 BUY 534 11.7 14.4 16.9 32.8 26.6 22.7 22.6 18.7 16.1 23.6 30.9 37.8 Jub. Food 175 1,326 BUY 1,758 25.1 31.5 38.2 52.8 42.1 34.7 27.5 21.9 18.0 48.9 64.5 85.2 Source: HDFC sec Inst Research

We cut our estimates to factor in slower than expected pickup in the rural demand

HUL: RESULTS REVIEW 4QFY19

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Income Statement (Rs mn) FY17 FY18 FY19 FY20E FY21E Net Revenues 331,620 355,450 393,100 452,117 552,064 Growth (%) 3.0 12.0 12.0 15.0 22.1 Material Expenses 163,130 167,300 184,740 207,070 235,179 Employee Expense 17,430 18,600 18,742 20,991 24,770 ASP Expense 35,420 41,530 46,070 53,350 66,248 Distribution Expenses 15,160 15,470 16,117 18,537 22,635 Other expenses 37,080 37,560 38,623 47,065 69,454 EBITDA 63,400 74,990 88,808 105,104 133,778 EBITDA Growth (%) 5.4 18.3 18.4 18.4 27.3 EBITDA Margin 19.1 21.1 22.6 23.2 24.2 Depreciation 4,320 5,200 5,650 6,099 7,436 EBIT 59,080 69,790 83,158 99,005 126,342 Other Income (Inc. EO Items) 6,060 3,510 3,220 6,083 8,976 Interest 350 260 330 - - PBT 64,790 73,040 86,048 105,089 135,318 Tax 19,770 20,790 25,440 31,527 39,919 RPAT 44,900 52,270 60,630 73,586 95,426 adjustment (2,420) (920) 818 - - APAT 42,480 51,350 60,800 73,586 95,426 APAT Growth (%) 2.0 20.9 18.4 21.0 29.7 Adjusted EPS (Rs) 19.7 23.8 28.1 33.4 40.7 EPS Growth (%) 2.1 20.9 18.4 18.5 22.0

Source: Company, HDFC sec Inst Research

Balance Sheet (Rs mn) FY17 FY18 FY19P FY20E FY21E SOURCES OF FUNDS Share Capital - Equity 2,160 2,160 2,160 2,345 2,345 Reserves 65,280 70,650 79,838 409,596 429,392 Total Shareholders Funds 67,440 72,810 81,998 411,941 431,736 Minority Interest 220 200 178 154 127 Long Term Debt - - - - - Short Term Debt 2,770 - - - - Total Debt 2,770 - - - - Net Deferred Taxes (1,700) (3,020) (3,730) (3,730) (3,730) Long Term Provisions & Others 7,940 11,160 20,770 22,876 26,126 TOTAL SOURCES OF FUNDS 76,670 81,150 99,216 431,240 454,259 APPLICATION OF FUNDS Net Block 44,190 45,280 45,280 55,481 58,045 CWIP 2,290 4,610 4,060 2,030 1,015 Other Non-current Assets 2,770 3,500 2,773 3,089 3,441 Total Non-current Assets 49,250 53,390 52,113 60,600 62,501 Goodwill - - - 308,700 308,700 Inventories 25,410 25,130 25,740 29,165 34,307 Debtors 10,850 13,100 18,160 20,886 25,504 Other Current Assets 9,300 14,810 15,819 18,168 22,147 Cash & Equivalents 56,230 63,590 73,064 91,581 119,528 Total Current Assets 101,790 116,630 132,783 159,801 201,486 Creditors 61,860 71,700 72,060 82,879 101,200 Other Current Liabilities & Provns 12,510 17,170 13,620 14,982 17,228 Total Current Liabilities 74,370 88,870 85,680 97,860 118,428 Net Current Assets 27,420 27,760 47,103 61,940 83,058 TOTAL APPLICATION OF FUNDS 76,670 81,150 99,216 431,240 454,259

Source: Company, HDFC sec Inst Research

HUL: RESULTS REVIEW 4QFY19

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Cash Flow Statement (Rs mn) FY17 FY18 FY19P FY20E FY21E Reported PBT 62,420 73,370 86,048 105,089 135,318 Non-operating & EO Items 290 (820) - - - Interest Expenses (2,250) (2,340) 330 - - Depreciation 4,320 5,200 5,650 6,099 7,436 Working Capital Change 5,660 7,910 468 5,470 9,727 Tax Paid (18,590) (22,680) (25,440) (31,527) (39,919) OPERATING CASH FLOW ( a ) 51,850 60,640 67,055 85,130 112,563 Capex (14,520) (8,780) (5,100) (5,970) (8,985) Free Cash Flow (FCF) 37,330 51,860 61,955 79,160 103,578 Investments (1,420) (5,700) 1,580 (322,000) (5,000) Non-operating Income 4,210 3,800 - - - INVESTING CASH FLOW ( b ) (11,730) (10,680) (3,520) (327,970) (13,985) Debt Issuance/(Repaid) 4,600 - - - - Interest Expenses (140) (60) (330) - - FCFE 41,790 51,800 61,625 79,160 103,578 Share Capital Issuance - - - 317,000 - Dividend (35,720) (38,870) (43,200) (50,760) (63,304) Others (10,880) (10,820) (8,412) (9,884) (12,326) FINANCING CASH FLOW ( c ) (42,140) (49,750) (51,942) 256,356 (75,630) NET CASH FLOW (a+b+c) (2,020) 210 11,594 13,517 22,947 EO Items, Others 7,136 (16,360) - - - Closing Cash & Equivalents 18,280 34,850 45,904 59,421 82,368

Source: Company, HDFC sec Inst Research

Key Ratios FY17 FY18 FY19P FY20E FY21E PROFITABILITY (%) GPM 50.8 52.9 53.0 54.2 57.4 EBITDA Margin 19.1 21.1 22.6 23.2 24.2 EBIT Margin 17.8 19.6 21.2 21.9 22.9 APAT Margin 12.8 14.4 15.5 16.3 17.3 RoE 63.8 73.2 78.5 29.8 22.6 RoIC 168.4 247.3 284.9 38.9 26.9 RoCE 53.6 64.0 68.3 28.3 21.9 EFFICIENCY Tax Rate (%) 30.5 28.5 29.6 30.0 29.5 Fixed Asset Turnover (x) 4.3 4.3 4.4 4.7 5.2 Inventory (days) 28.0 25.8 23.9 23.5 22.7 Debtors (days) 11.9 13.5 16.9 16.9 16.9 Other Current Assets (days) 10.2 15.2 14.7 14.7 14.6 Payables (days) 68.1 73.6 66.9 66.9 66.9 Other Current Liab & Provns (days) 13.8 17.6 12.6 12.1 11.4 Cash Conversion Cycle (days) (31.7) (36.8) (24.1) (23.9) (24.1) Net D/E (x) (0.8) (0.9) (0.9) (0.2) (0.3) PER SHARE DATA (Rs) EPS 19.7 23.8 28.1 33.4 40.7 CEPS 21.7 26.2 30.8 36.0 43.9 Dividend 17.0 20.0 23.5 27.0 30.5 Book Value 31.2 33.7 38.0 175.7 184.1 VALUATION P/E (x) 86.1 71.2 60.2 50.8 41.6 P/BV (x) 54.2 50.2 44.6 9.6 9.2 EV/EBITDA (x) 56.9 47.9 40.4 36.9 28.8 EV/Revenues (x) 10.9 10.1 9.1 8.6 7.0 OCF/EV (%) 1.4 1.7 1.9 2.2 2.9 FCF/EV (%) 1.0 1.4 1.7 2.0 2.7 FCFE/Mkt Cap (%) 1.1 1.4 1.7 2.0 2.6 Dividend Yield (%) 1.0 1.2 1.4 1.6 1.8

Source: Company, HDFC sec Inst Research

HUL: RESULTS REVIEW 4QFY19

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RECOMMENDATION HISTORY

Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Date CMP Reco Target 15-May-18 1,504 BUY 1,615

7-Jun-18 1,571 BUY 1,701 9-Jul-18 1,678 NEU 1,709

16-Jul-18 1,751 NEU 1,709 10-Oct-18 1,514 NEU 1,687 13-Oct-18 1,570 NEU 1,691 4-Dec-18 1,808 NEU 1,855 9-Jan-19 1,771 NEU 1,855

18-Jan-19 1,752 NEU 1,855 10-Apr-19 1,681 NEU 1,844 4-May-19 1,693 NEU 1,804

1,400

1,450

1,500

1,550

1,600

1,650

1,700

1,750

1,800

1,850

1,900

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov-

18

Dec -

18

Jan-

19

Feb-

19

Mar

-19

Apr-

19

May

-19

HUVR TP

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Disclosure: We, Naveen Trivedi, MBA & Siddhant Chhabria, PGDBM, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. 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