Live news , top stories, corporate news, company news, sector news, economy news, results analysis news, ceo interviews, fund manager interview, advisor interview, market news, bazaar talk, hot stocks news, ipo news, commodities news, mutual fund news, insurance news, news wire
25 September, 2022 10:57 IST
Hindustan Unilever Q1 Review - In-line; inflation to be the chief concern; Hold
Source: IRIS | 23 Jul, 2021, 05.10PM
Rating: NAN / 5 stars.
Comments  |  Post Comment

Hindustan Unilever (HUVR) 1QFY22 result was in line with our estimates. Resiliency in demand for health, hygiene and nutrition portfolio helped HUL to protect decline in revenue growth (compared to 4QFY21) due to impact of 2nd wave induced lockdowns.  Revenue from discretionary and out of home consumption portfolio impacted significantly. Demand from rural outperformed urban during the quarter.

Commenting on the result review, IDBI Capital said, "Positively HUL has taken 3% price hike in respective product portfolio to mitigate the impact of inflation. Further, premium portfolio is growing at 2x compared to other products; this should be more margin accretive.

Management expects integration with GSK to be 100% complete by Dec’21; this should aid in acceleration of revenue growth in food and refreshment category. However, cost inflation in palm oil, tea and crude oil remains chief concern and is unlikely to abate soon.

Consequently, we have marginally trimmed our EPS estimates by 5% in FY22E and 2% in FY23E. Our revised TP stands at Rs 2,567 (vs 2,607 earlier) with HOLD rating."

Key Highlights and Investment Rationale

Resiliency in demand for Health, hygiene and nutrition drives topline

On comparable basis revenue grew 12%YoY driven by 9%YoY volume growth and c. 3% price hike in laundry, tea and skin care portfolio. Demand for health, hygiene and nutrition portfolio (c. 85% revenue share) continued to remain healthy and grew at 8%YoY (16% QoQ) while discretionary portfolio (c. 12% revenue share) and OOH (3% revenue share) reported decline of 24% QoQ (+39%YoY) and -40% QoQ (+91%YoY). Revenue from home care and food and refreshment grew 12%YoY respectively while from beauty and personal care grew 13%YoY. Revenue from online channels grew 2x YoY and now contributes > c. 10% to the business.

Margins impacted due to inflationary raw material

Gross margin declined 33bp YoY to 51.5% due to inflationary pressure of key raw material prices viz; palm oil, tea and crude oil. EBITDA margin contracted 114bp to 23.9% due to lower gross margin and higher ad spends (+105bpYoY as % of revenue). Adjusted PAT grew 4.4%YoY to Rs 20 billion.

Trim estimates to factor inflation; HOLD

We have factored in impact of rise in inflationary pressure into our estimate. We have trimmed our EPS estimate for FY22-23E by 5% and 2% respectively. Accordingly, our revised TP stands at Rs 2,567 (55x FY23E EPS) with HOLD rating. 

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.


 Post Comment
Name Email
Security Code type    into this box
Related Articles
Home  |   Shares  |   F&O  |   Mutual Funds  |   Loans  |   Insurance  |   News Centre
Wealth Tracker  |   Newsletters  |   Tax Corner  |   NRI Centre  |   Advertise
© All rights reserved. IRIS Business Services Limited
A Disclaimer