01 May 2020 Results Review 4QFY20 Hindustan Unilever · Indulekha Neemraj oil Pan-India - Hair care...
Transcript of 01 May 2020 Results Review 4QFY20 Hindustan Unilever · Indulekha Neemraj oil Pan-India - Hair care...
01 May 2020 Results Review 4QFY20
Hindustan Unilever
HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
Miss led by supply chain disruptions
HUL posted weak performance across all fronts in 4QFY20 despite our
estimates being lower than consensus. Revenue and volume decline of 9% and
7% was impacted by weak BPC market growth and lockdown led trade de-
stocking in March. Lockdown led supply chain disturbance will be resolved
in the coming months. However, underlying demand which was already
reeling in FY20 will be further impacted in FY21. Consumer trends are
expected to change sharply for many categories in FY21. Discretionary, OOH
consumption and rural will remain tepid. In our recent thematic report (link),
we have already cut down estimates for our coverage universe. However, we
expect there can be more downside risk to our estimates for all. We cut our
EPS estimates for HUL by 7-8% for FY21 and FY22. We value HUL at 47x on
Mar-22E EPS, our TP is at Rs 1,969 (earlier 2,113). Maintain REDUCE.
Revenue weakness again led by BPC: Revenues declined by 9% (+9% in
4QFY19 and +4% in 3QFY20) vs expectation of 3% decline. Volume dipped
by 7% (+7% in 4QFY19 and +5% in 3QFY20) vs expectation of 1% decline.
Decline in Home Care/BPC/F&R was 4/14/7%. The impact on BPC was
sharper as a result of weak demand pre-Covid along with the lockdown
impact.
Miss in margins: GM expanded by 142bps to 53.7% (-27bps in 4QFY19 and
+44bps in 3QFY20) vs. exp of +119bps. Reclassification of certain cost lower
down RM (impact was 40bps). Employee/A&P/Other expenses increased by
-12/+5/-8%. The increase in A&P led to a dip in EBITDA margin of 40bps to
22.9%. Adj EBITDA margin was down 160bps to 21.8% (+83bps in 4QFY19
and +237bps in 3QFY20) vs expectation of +220 bps. EBITDA declined by
16% YoY. EBIT margins for Home Care/BPC/F&R up by +131/-291/-547bps.
Call & other takeaways: (1) HUL’s 80% portfolio gained market share,
aggregate market share up by 50bps, (2) Rural and discretionary categories
impacted consumer offtake in March (down by 1% in value/vol terms), (3)
Out of 12% revenue swing post Covid, ~6% was attributed to constraints at
the distributor level and ~3% at the retail level, (4) Co is now working at 75-
80% of capacity, (5) Downtrading within SKUs is possible, (6) Recent
innovations were around Lifebuoy (Germ kills spray and hand sanitizer),
Domex and Surf Excel.
Maintain REDUCE: While HUL remains a resilient business model within
the sector, it’s not immune to slowdown given select discretionary
categories and possible downtrading. Recent run-up amidst flight to
safety, limits upsides in the medium term. Risk-reward is unattractive.
Financial Summary
YE Mar (Rs mn) 4Q
FY20
4Q
FY19
YoY
(%)
3Q
FY20
QoQ
(%) FY19 FY20P FY21E FY22E
Net Sales 90,110 99,450 (9.4) 98,080 (8.1) 393,100 397,830 469,145 506,628
EBITDA 19,600 23,210 (15.6) 23,324 (16.0) 88,800 98,610 123,814 138,499
APAT 15,630 15,900 (1.7) 16,910 (7.6) 60,800 68,604 87,149 98,364
Diluted EPS (Rs) 7.2 7.3 (1.7) 7.8 (7.6) 28.1 31.7 37.1 41.9
P/E (x)
78.1 69.3 59.2 52.4
EV / EBITDA (x)
52.8 47.5 40.9 36.3
RoCE (%)
69.2 71.2 33.2 22.6
Source: Company, HSIE Research
REDUCE
CMP (as on 30 Apr 2020) Rs 2,196
Target Price Rs 1,969
NIFTY 9,860
KEY
CHANGES OLD NEW
Rating REDUCE REDUCE
Price Target Rs 2,113 Rs 1,969
EPS % FY21E FY22E
-8% -7%
KEY STOCK DATA
Bloomberg code HUVR IN
No. of Shares (mn) 2,348
MCap (Rs bn) / ($ mn) 5,155/68,787
6m avg traded value (Rs mn) 5,282
52 Week high / low Rs 2,614/1,656
STOCK PERFORMANCE (%)
3M 6M 12M
Absolute (%) 7.9 0.9 24.9
Relative (%) 25.1 16.9 38.5
SHAREHOLDING PATTERN (%)
Dec-19 Apr-20
Promoters 67.18 61.90
FIs & Local MFs 6.68 6.32
FPIs 12.32 12.04
Public & Others 13.82 19.74
Pledged Shares 0.0 0.0
Source : BSE
Varun Lohchab
+91-22-6171-7334
Naveen Trivedi
+91-22-6171-7324
Aditya Sane
+91-22-6171-7336
Page | 2
Hindustan Unilever: Results Review 4QFY20
HUL Quarterly Commentary Particulars 1QFY20 2QFY20 3QFY20 4QFY20
Industry - Near term demand to remain
subdued given macro economic
conditions
- Expect pickup in 2HFY20
- Rural is at par with Urban
- Nielsen is saying 300bps decline
in growth sequentially
- Demand outlook continues to
be challenging
- Premiumisation is intact
- Naturals is growing faster
- MP, Chattisgarh, Greater
Maharashtra, Punjab, Haryana
have been slow
- Southern mkts and UP are doing
well
- Demand outlook continues to
be challenging
- Rural remained muted, 0.5x of
Urban (1.4-15x in FY19), Naturals
is growing faster. Liquidity
challenges continue
- Premiumisation is intact.
Commodities and currency will
continue to be volatile
- Hopeful for gradual
improvement in rural demand.
- Demand outlook remained
challenging pre-Covid
- Rural growth continue to lag
behind urban. With flow of
money from urban to rural will be
constrained, rural can be muted
in FY21
- Co is now operating at 75-80% of
capacity
- Co is partnering with
aggregators to drive revenues
- MGT expects significant shift to
Ecomm by consumers and
technology by retailers
Revenue
Home Care - Relaunched Rin nationally
- Launched Sunlight liquid in
select geographies
- Household care portfolio growth
is led by Central & South markets
- Launched premium brand Love
& Care in select channels
- Launched Magic Rinse powder
sachet in TN
- Purifiers good growth in the
premium segment
- Focus on core and
premiumisation supporting
- New campaign for Wheel
advanced
- Launched Comfort Perfume
Deluxe in select geographies
- Purifiers good growth in the
premium segment
- Demand for Home Care was
sustained during the lockdown
- Co does not expect significant
downtrading across brands
BPC - Price reduction in 4-6% on Lux
and Lifebuoy.
- Launched Lux Botanicals and
Pears Naturale range nationally
and Fair & Lovely Soap in select
geographies
- Relaunched Pond’s Men range;
launched FAL Ayurveda
facewash and facial kits
- Haircare is doing well
(Launched new Sunsilk variants
nationally with natural
ingredients)
- Momentum on Close Up and
Ayush Oral Care continues to
build. Pepsodent WIP
- Personal wash pricing actions
on popular segment landed,
Dove and Pears price cuts
coming (Total price cut of ~6%)
- Fair & Lovely soap launch well
received
- Launched Pears Natural
bodywash range nationally
- Skin Care seen double digit
growth backed by robust
performance across brands
- Hair Care seeing steady
performance across portfolio
- Colour Cosmetics sustaining
strong growth; Continued focus
in channels of the future
- Personal wash pricing actions,
delayed winter and weak
sentiments impacted BPC
- Good growth in non-winter
portfolio
- Launched Love Beauty & Planet
in Ecommerce channel and
Indulekha Neemraj oil Pan-India
- Hair care sustained healthy
growth
- Oral care growth was steady
despite weak category growth
- Co took 15% price in PC
portfolio. Price cut in sanitizers
was 50% (being in essentials)
- Demand for non-discretionary
PC products was resilient
- Launched new products like
disinfectant sprays and wipes,
immunity boosting sanitzers to
drive revenues. Co has also
launched a range of SKUs in hand
sanitizers
- Discretionary and OOH
categories will be impacted in
FY21
F&R - Robust growth in Ice Creams
- Tea - stress in few plantations.
Need to track impact on price and
quality of upcoming crop
- Ice Cream & Frozen Desserts:
Sustained strong growth
momentum
- Naturals is growing at 1.5x YTD
because Indulekha growth has
moderated
- Broad-based growth in
Beverages, new communication
for Lipton Green Tea
- Ice Cream & Frozen Desserts
sustained strong growth
- Pilot launch of Hellmann’s
Mayonnaise in Kolkata
- Out of home consumption and
ice cream witnessed impact from
mid March.
- Food services biz came to a
standstill for the co due to the
lockdown.
Margin
Gross Margin - Palm oil is down 15-20%
- Pricing strategy - Based on
outlook of commodity. Home care
and other BPC there are options
to take price hikes
- Product mix, benign RM
inflation and cost saving
initiatives drove margin
- Product mix, benign RM
inflation and cost saving
initiatives drove margin
- Palm oil and SMP are up sharply
- Veg inflation impacted GM for
FY20
- Co is exploring cost saving
models to boost margins in FY21
EBITDA
Margin
- Competitive intensity has
declined in GT hence lower A&P
spend. Home care earlier spent
more and hence moderated
- Competitive intensity has
increased in few categories in
modern trade
- Adj EBITDA Margin (ex-IND
AS and refunds) was up by
150bps YoY. Thereby, adj
EBITDA grew by 14% YoY
- Co will continue to invest on
A&P
- Adj EBITDA Margin (ex-IND
AS and refunds) was up by
210bps YoY. Thereby, adj
EBITDA grew by 14% YoY
- Cost rationalisation initiatives
will continue
- Adj EBITDA Margin (ex-IND
AS) was down by 160bps YoY.
Thereby, adj EBITDA declined
by 16% YoY
- Co has cut back on ASP in April
and will assess ASP on monthly
basis
Page | 3
Hindustan Unilever: Results Review 4QFY20
Quarterly standalone Financial Snapshot (Standalone)
Particulars (Rs mn) Mar-20 Mar-19 YoY
(bps) Dec-19
QoQ
(bps) FY20 FY19
YoY
(bps)
Net Sales 88,850 98,090 (9.4) 96,960 (8.4) 3,82,730 3,76,600 1.6
Other Operating Income 1,260 1,360 (7.4) 1,120 12.5 5,120 5,640 (9.2)
Total Income 90,110 99,450 (9.4) 98,080 (8.1) 3,87,850 3,82,240 1.5
Material Expenses 41,700 47,430 (12.1) 44,900 (7.1) 1,77,930 1,79,600 (0.9)
Employee Expenses 3,550 4,020 (11.7) 4,540 (21.8) 16,910 17,470 (3.2)
ASP 11,640 11,070 5.1 11,630 0.1 46,860 45,520 2.9
Other Operating Expenses 12,570 13,720 (8.4) 12,560 0.1 50,150 53,280 (5.9)
EBITDA 20,650 23,210 (11.0) 24,450 (15.5) 96,000 86,370 11.1
Adj EBITDA (IND AS 116) 19,600 23,210 (15.6) 23,324 (16.0) 91,865 86,370 6.4
Depreciation 2,550 1,340 90.3 2,320 9.9 9,380 5,236 79.1
EBIT 18,100 21,870 (17.2) 22,130 (18.2) 86,620 81,134 6.8
Other Income 2,660 1,180 125.4 1,400 90.0 7,330 6,640 10.4
Interest Cost 260 70 271.4 250 4.0 1,060 280 278.6
PBT 20,500 22,980 (10.8) 23,280 (11.9) 92,890 87,494 6.2
Exceptional (580) (710) na (990) na (1,970) (2,270) na
PBT (after exceptional) 19,920 22,270 (10.6) 22,290 (10.6) 90,920 85,224 6.7
Tax 4,730 6,890 (31.3) 6,130 (22.8) 24,094 24,860 (3.1)
RPAT 15,190 15,380 (1.2) 16,160 (6.0) 67,380 60,364 11.6
Adjustment (442) (520) na (750) na (936) (436)
APAT 15,632 15,900 (1.7) 16,910 (7.6) 68,316 60,800 12.4
EPS (Adjusted) 7.2 7.3 (1.7) 7.8 (7.6) 31.6 28.1 12.4
Source: Company, HSIE Research
Quarterly Performance Analysis
As % Of Net Revenue Mar-20 Mar-19 YoY
(bps) Dec-19
QoQ
(bps) FY20 FY19 YoY (%)
Material Expenses 46.3 47.7 (142) 45.8 50 45.9 47.0 (111)
Employee Expenses 3.9 4.0 (10) 4.6 (69) 4.4 4.6 (21)
ASP Expenses 12.9 11.1 179 11.9 106 12.1 11.9 17
Other Operating Expenses 13.9 13.8 15 12.8 114 12.9 13.9 (101)
EBITDA Margin (%) 22.9 23.3 (42) 24.9 (201) 24.8 22.6 216
Adj EBITDA Margin (%) 21.8 23.3 (159) 23.8 (203) 23.7 22.6 109
Tax Rate (%) 23.7 30.9 (719) 27.5 (376) 26.5 29.2 (267)
APAT Margin (%) 17.3 16.0 136 17.2 11 17.6 15.9 171
Source: Company, HSIE Research
Domestic revenue declined
9% with volume decline of
7% (est 1% decline)
Employee/A&P/Other
expenses increased by
-12/+5/-8%
GM was up 142bps to
53.7% (-27bps in 4QFY19
and +44bps in 3QFY20) vs
expectation of +119bps
Page | 4
Hindustan Unilever: Results Review 4QFY20
Operational Segmental Performance (Standalone)
(Rs mn) Mar-20 Mar-19 YoY
(bps) Dec-19
QoQ
(bps) FY20 FY19
YoY
(bps)
Segmental Revenues
Home Care 33,500 35,020 (4.3) 34,560 (3.1) 1,36,420 1,28,760 5.9
Beauty & PC 38,010 43,930 (13.5) 44,120 (13.8) 1,73,450 1,76,550 (1.8)
Foods & Refreshment 17,880 19,160 (6.7) 18,650 (4.1) 74,500 71,330 4.4
Others 720 1,340 (46.3) 750 (4.0) 3,480 5,600 (37.9)
Total 90,110 99,450 (9.4) 98,080 (8.1) 3,87,850 3,82,240 1.5
Segmental EBIT
Home Care 6,360 6,190 2.7 6,290 1.1 25,590 21,510 19.0
Beauty & PC 9,450 12,200 (22.5) 12,520 (24.5) 48,700 47,040 3.5
Foods & Refreshment 2,250 3,460 (35.0) 3,340 (32.6) 12,320 12,230 0.7
Others 40 20 100.0 (20) (300.0) 60 (10) na
Total 18,100 21,870 (17.2) 22,130 (18.2) 86,670 80,770 7.3
(a) Interest Cost & Bank
Charges - 70 (100.0) 250 (100.0) 800 280 185.7
(b) Other Un-allocable
Expenses 40 20 100.0 (20) (300.0) 60 (10) na
PBT 18,100 22,980 (21.2) 22,290 (18.8) 89,100 86,830 2.6
Capital Employed
Home Care (3,760) (4,820) na (9,520) na (3,760) (4,820) na
Beauty & PC (2,320) (2,200) na (9,300) na (2,320) (2,200) na
Foods & Refreshment 9,550 8,680 10.0 5,470 74.6 9,550 8,680 10.0
Others 530 770 (31.2) 410 29.3 530 770 (31.2)
Total 4,000 2,430 64.6 (12,940) na 4,000 2,430 64.6
Source: Company, HSIE Research
EBIT Margin
EBIT Margin Mar-20 Mar-19 YoY
(bps) Dec-19
QoQ
(bps) FY20 FY19
YoY
(bps)
Home Care 19.0 17.7 131 18.2 78 18.8 16.7 205
PC 24.9 27.8 (291) 28.4 (352) 28.1 26.6 143
Foods & Refreshment 12.6 18.1 (547) 17.9 (532) 16.5 17.1 (61)
Others 5.6 1.5 406 (2.7) 822 1.7 (0.2) na
Total 20.1 22.0 (190) 22.6 (248) 22.3 21.1 122
Source: Company, HSIE Research
Page | 5
Hindustan Unilever: Results Review 4QFY20
Long term performance trends
Net Revenue Growth Underlying Volume Growth
Source: Company, HSIE Research
Source: Company, HSIE Research
EBITDA APAT
Source: Company, HSIE Research Source: Company, HSIE Research
1
(1)
6 5
10
17 16 16
11 11 9
7 7
3
(9)(12)
(9)
(6)
(3)
-
3
6
9
12
15
18
21
Q2
FY1
7
Q3
FY1
7
Q4
FY1
7
Q1
FY1
8
Q2
FY1
8
Q3
FY1
8
Q4
FY1
8
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
%
(1)
(4)
4
0
4
11 1112
10 10
7
5 5 5
(7)-8
-6
-4
-2
0
2
4
6
8
10
12
14
Q2
FY1
7
Q3
FY1
7
Q4
FY1
7
Q1
FY1
8
Q2
FY1
8
Q3
FY1
8
Q4
FY1
8
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
%
10.0
13.0
16.0
19.0
22.0
25.0
28.0
-
4,000
8,000
12,000
16,000
20,000
24,000
28,000
Q2
FY1
7
Q3
FY1
7
Q4
FY1
7
Q1
FY1
8
Q2
FY1
8
Q3
FY1
8
Q4
FY1
8
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
EBITDA EBITDA Margin (%) - RHS
%Rs mn
8.0
10.0
12.0
14.0
16.0
18.0
20.0
6,000
8,000
10,000
12,000
14,000
16,000
Q2
FY1
7
Q3
FY1
7
Q4
FY1
7
Q1
FY1
8
Q2
FY1
8
Q3
FY1
8
Q4
FY1
8
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
APAT NPM (%) - RHS%
Rs mn
Page | 6
Hindustan Unilever: Results Review 4QFY20
A&P Personal Care Performance
Source: Company, HSIE Research Source: Company, HSIE Research
Home Care Performance Food & Refreshment Performance
Source: Company, HSIE Research Source: Company, HSIE Research
10.00
11.00
12.00
13.00
14.00
6,500
8,500
10,500
12,500
Q2
FY
17
Q3
FY
17
Q4
FY
17
Q1
FY
18
Q2
FY
18
Q3
FY
18
Q4
FY
18
Q1
FY
19
Q2
FY
19
Q3
FY
19
Q4
FY
19
Q1
FY
20
Q2
FY
20
Q3
FY
20
Q4
FY
20
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
Q2
FY1
7
Q3
FY1
7
Q4
FY1
7
Q1
FY1
8
Q2
FY1
8
Q3
FY1
8
Q4
FY1
8
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
Revenue EBIT Margin - RHS%Rs mn
6.0
10.0
14.0
18.0
22.0
20,000
24,000
28,000
32,000
36,000
Q2
FY
17
Q3
FY
17
Q4
FY
17
Q1
FY
18
Q2
FY
18
Q3
FY
18
Q4
FY
18
Q1
FY
19
Q2
FY
19
Q3
FY
19
Q4
FY
19
Q1
FY
20
Q2
FY
20
Q3
FY
20
Q4
FY
20
Revenue EBIT Margin - RHS
%Rs mn
-
4.0
8.0
12.0
16.0
20.0
24.0
8,000
10,000
12,000
14,000
16,000
18,000 Q
2FY1
7
Q3F
Y17
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
Revenue EBIT Margin - RHS%
Rs mn
Page | 7
Hindustan Unilever: Results Review 4QFY20
Beauty & Personal Care Performance Particulars
(Rs mn) Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
Revenue 40,900 40,960 44,070 43,160 45,390 43,930 45,890 45,430 44,120 38,010
YoY Gr.
(%) 20.0% 13.0% 14.0% 10.4% 11.0% 7.3% 4.1% 5.3% -2.8% -13.5%
Revenue
Mix (%) 47.6% 45.0% 46.5% 46.7% 47.5% 44.2% 45.4% 46.1% 45.0% 42.2%
EBIT 10,070 10,660 12,040 11,150 11,650 12,200 13,580 13,150 12,520 9,450
YoY Gr.
(%) 9.4% 8.3% 11.6% 17.6% 15.7% 14.4% 12.8% 17.9% 7.5% -22.5%
EBIT
Margin (%) 24.6% 26.0% 27.3% 25.8% 25.7% 27.8% 29.6% 28.9% 28.4% 24.9%
EBIT Mix
(%) 65.8% 57.2% 56.7% 58.8% 62.3% 55.8% 55.7% 59.6% 56.6% 52.2%
Home Care Performance Particulars
(Rs mn) Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
Revenue 27,410 31,020 31,460 30,800 31,480 35,020 34,650 33,710 34,560 33,500
YoY Gr.
(%) 17.0% 21.0% 20.0% 12.4% 14.8% 12.9% 10.1% 9.4% 9.8% -4.3%
Revenue
Mix (%) 31.9% 34.1% 33.2% 33.4% 32.9% 35.2% 34.3% 34.2% 35.2% 37.2%
EBIT 3,540 5,090 5,940 4,920 4,460 6,190 6,990 5,950 6,290 6,360
YoY Gr.
(%) 51.1% 30.8% 32.6% 28.5% 26.0% 21.6% 17.7% 20.9% 41.0% 2.7%
EBIT
Margin (%) 12.9% 16.4% 18.9% 16.0% 14.2% 17.7% 20.2% 17.7% 18.2% 19.0%
EBIT Mix
(%) 23.1% 27.3% 28.0% 25.9% 23.9% 28.3% 28.7% 27.0% 28.4% 35.1%
Food & Refreshment Performance Particulars
(Rs mn) Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
Revenue 15,720 17,350 17,850 17,040 17,280 19,160 19,500 18,470 18,650 17,880
YoY Gr.
(%) 15.5% 12.0% 14.0% 11.7% 9.9% 10.4% 9.2% 8.4% 7.9% -6.7%
Revenue
Mix (%) 18.3% 19.1% 18.8% 18.5% 18.1% 19.3% 19.3% 18.7% 19.0% 19.8%
EBIT 1,720 2,870 3,280 2,880 2,610 3,460 3,790 2,940 3,340 2,250
YoY Gr.
(%) -12.9% 16.2% 11.2% 24.7% 51.7% 20.6% 15.5% 2.1% 28.0% -35.0%
EBIT
Margin (%) 10.9% 16.5% 18.4% 16.9% 15.1% 18.1% 19.4% 15.9% 17.9% 12.6%
EBIT Mix
(%) 11.2% 15.4% 15.4% 15.2% 14.0% 15.8% 15.5% 13.3% 15.1% 12.4%
Page | 8
Hindustan Unilever: Results Review 4QFY20
Assumptions (Including GSK Consumer Acquisition)
Particulars FY17 FY18 FY19 FY20E FY21E FY22E
Revenue (Rs
mn)
Home Care 113,460 116,260 128,740 136,400 148,096 161,326
Beauty & PC 164,320 165,880 178,000 174,880 177,613 187,128
Foods 11,240 11,650 12,543 12,695 69,335 77,121
- HUL 11,240 11,650 12,543 12,695 13,816 14,939
- GSK na na na - 55,519 62,181
Refreshment 48,480 53,110 58,767 61,805 62,653 67,889
Others (export,
infant &
feminine care)
19,600 15,330 15,050 12,050 11,448 13,165
Total 357,100 362,230 393,100 397,830 469,145 506,628
YoY Growth
Home Care 5% 14% 15% 6% 9% 9%
Beauty & PC 2% 11% 11% -2% 2% 5%
Foods 3% 4% 12% 1% 446% 11%
- HUL 3% 4% 12% 1% 9% 8%
- GSK
(underlying
growth)
na na na 8% 8% 12%
Refreshment 8% 10% 12% 5% 1% 8%
Others -5% -22% -6% -20% -5% 15%
Total 3% 6% 12% 1% 18% 8%
Total (Ex-GSK) 3% 6% 12% 1% 4% 7%
EBIT Margin
Home Care 11.2% 14.6% 16.7% 18.8% 19.8% 20.3%
Beauty & PC 23.7% 25.3% 26.7% 28.0% 27.2% 28.0%
Foods 7.7% 8.5% 10.0% 9.7% 31.4% 33.9%
- HUL 7.7% 8.5% 10.0% 9.7% 9.7% 10.5%
- GSK na na na 0.0% 36.8% 39.5%
Refreshment 15.7% 16.9% 18.8% 17.9% 17.4% 18.5%
Others 10.2% 9.5% 11.8% 14.3% 13.5% 14.5%
Total 17.4% 19.5% 21.2% 22.3% 23.8% 24.8%
Gross Margin
(%) 50.8 52.9 53.0 54.1 57.1 57.7
Employee (% of
sales) 5.3 5.2 4.8 4.6 4.6 4.5
ASP (% of sales) 10.7 11.7 11.7 11.8 10.7 10.7
Distribution (%
of sales) 4.6 4.4 4.1 3.9 4.0 4.0
Other Expenses
(% of sales) 11.2 10.6 9.9 9.0 11.4 11.2
EBITDA Margin
(%) 19.1 21.1 22.6 24.8 26.4 27.3
Tax Rate (%) 30.1 28.1 29.2 26.3 26.0 26.0
HUL (Ex GSK)
FY21E FY22E
Revenue 413,626 444,447
YoY Gr (%) 4.0% 7.5%
EBITDA 107,713 118,601
YoY Gr (%) 9.2% 10.1%
Page | 9
Hindustan Unilever: Results Review 4QFY20
Change in Estimates
FY20E FY21E FY22E
OLD NEW Chg (%) OLD NEW Chg (%) OLD NEW Chg (%)
Net Sales 407,525 397,830 -2.4% 473,884 469,145 -1.0% 509,174 506,628 -0.5%
EBITDA 103,868 98,610 -5.1% 122,588 123,814 1.0% 137,810 138,499 0.5%
APAT 72,095 68,604 -4.8% 94,213 87,149 -7.5% 105,602 98,364 -6.9%
EPS 33.3 31.7 -4.8% 40.1 37.1 -7.5% 45.0 41.9 -6.9%
Peer Set Comparison
Company Mcap
(Rs bn)
CMP
(Rs/sh) Reco TP
EPS (Rs) P/E (x) EV/EBITDA (x) Core RoCE (%)
FY20E/
CY19P
FY21E/
CY20E
FY22E/
CY21E
FY20E/
CY19P
FY21E/
CY20E
FY22E/
CY21E
FY20E/
CY19P
FY21E/
CY20E
FY22E/
CY21E
FY20E/
CY19P
FY21E/
CY20E
FY22E/
CY21E
HUL 5,155 2,196 REDUCE 1,969 31.7 37.1 41.9 69.3 59.2 52.4 47.5 40.8 36.3 230.7 46.5 28.8
ITC 2,219 181 BUY 221 12.5 11.9 13.0 14.4 15.2 13.9 9.8 10.1 9.0 44.5 43.4 48.0
Nestle 1,726 17,899 REDUCE 14,042 206.2 237.7 279.0 86.8 75.3 64.2 57.9 51.9 45.3 74.9 70.3 68.7
Dabur 863 490 REDUCE 447 9.0 10.0 11.2 54.4 48.9 43.8 43.7 40.5 36.0 51.4 52.7 55.9
Britannia 759 3,161 REDUCE 2,711 56.4 61.9 71.4 56.0 51.0 44.3 40.8 36.7 32.3 41.1 43.4 47.2
GCPL 555 543 REDUCE 529 14.5 15.9 17.6 37.4 34.2 30.8 26.7 25.7 23.7 18.5 20.0 22.1
Marico 372 288 REDUCE 287 8.1 8.5 9.6 35.8 33.7 30.1 25.2 24.2 22.0 43.9 45.8 50.5
United
Spirits 389 536 ADD 585 11.9 13.7 16.1 46.8 39.2 33.3 26.8 24.4 21.2 17.9 19.1 20.8
Colgate 398 1,464 ADD 1,372 29.8 32.0 36.1 49.1 45.8 40.5 31.2 29.1 26.0 69.6 72.7 80.5
Jubilant 213 1,617 ADD 1,502 30.1 21.9 37.5 53.7 74.0 43.1 32.7 40.8 25.5 31.4 12.0 22.6
Emami 88 195 REDUCE 221 11.7 11.6 13.0 16.6 16.7 15.0 11.9 11.8 10.6 23.2 24.1 29.9
Radico
Khaitan 39 296 BUY 371 16.1 19.6 23.2 18.3 15.1 12.8 11.1 9.5 7.9 14.9 14.3 15.8
Source: Company, HSIE Research
Page | 10
Hindustan Unilever: Results Review 4QFY20
Financials Consolidated Income Statement (Rs mn) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E
Net Revenues 319,722 321,860 331,620 355,450 393,100 397,830 469,145 506,628
Growth (%) 9.4 3.8 3.0 12.0 12.0 1.2 17.9 8.0
Material Expenses 161,761 158,723 163,130 167,300 184,740 182,590 201,263 214,304
Employee Expense 17,239 16,800 17,430 18,600 18,750 18,200 21,524 22,815
ASP Expense 39,436 36,560 35,420 41,530 46,070 47,130 50,199 54,209
Distribution Expenses 14,604 14,500 15,160 15,470 15,990 15,515 18,766 20,265
Other expenses 32,545 35,146 37,080 37,560 38,750 35,785 53,580 56,535
EBITDA 54,138 60,131 63,400 74,990 88,800 98,610 123,814 138,499
EBITDA Growth (%) 14.2 11.1 5.4 18.3 18.4 11.0 25.6 11.9
EBITDA Margin (%) 16.9 18.7 19.1 21.1 22.6 24.8 26.4 27.3
Depreciation 3,224 3,530 4,320 5,200 5,650 10,020 11,308 11,925
EBIT 50,914 56,601 59,080 69,790 83,150 88,590 112,506 126,574
Other Income 5,666 4,230 4,660 4,810 6,550 6,320 6,323 7,093
EO Items, Others 6,792 (310) 2,370 (330) (2,270) (1,990) - -
Interest 177 170 350 260 330 1,180 1,060 742
PBT 63,196 60,351 65,760 74,010 87,100 91,740 117,769 132,925
Tax 19,440 18,830 19,770 20,790 25,440 24,090 30,620 34,560
RPAT 43,631 41,451 45,870 53,240 61,660 67,650 87,149 98,364
adjustment 4,703 (213) (3,390) (1,890) (436) (954) - -
Adjusted PAT 38,928 41,664 42,480 51,350 60,800 68,604 87,149 98,364
APAT Growth (%) 3.7 7.0 2.0 20.9 18.4 12.8 27.0 12.9
Adjusted EPS (Rs) 18.0 19.3 19.7 23.7 28.1 31.7 37.1 41.9
EPS Growth (%) 3.6 7.0 2.1 20.6 18.4 12.8 17.1 12.9
Source: Company, HSIE Research
Consolidated Balance Sheet (Rs mn) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E
SOURCES OF FUNDS
Share Capital - Equity 2,164 2,164 2,160 2,164 2,165 2,165 2,349 2,349
Reserves 38,111 63,570 65,280 70,650 76,510 83,894 417,655 437,325
Total Shareholders Funds 40,275 65,734 67,440 72,814 78,675 86,058 420,004 439,674
Minority Interest 252 200 220 200 180 180 180 180
Long Term Debt 70 - - - 990 - - -
Short Term Debt 360 1,770 2,770 - - - - -
Total Debt 430 1,770 2,770 - 990 - - -
Net Deferred Taxes (1,998) (2,333) (1,700) (3,020) (3,730) (3,730) (3,730) (3,730)
Long Term Provisions & Others 11,686 13,347 7,940 11,160 12,990 14,466 15,625 16,497
TOTAL SOURCES OF FUNDS 50,645 78,718 76,670 81,154 89,105 96,974 432,079 452,621
APPLICATION OF FUNDS
Net Block 28,210 32,580 44,190 45,280 47,150 54,790 56,782 52,857
CWIP 5,163 4,080 2,290 4,610 4,060 5,970 2,985 1,493
Other Non-current Assets 5,872 6,362 2,770 3,500 6,180 5,800 6,444 7,161
Total Non-current Assets 39,246 43,022 49,250 53,390 57,390 66,560 66,211 61,510
Goodwill - - - - - - 308,700 308,700
Inventories 28,488 27,260 25,410 25,130 25,740 27,670 31,447 33,717
Debtors 10,103 12,640 10,850 13,100 18,160 11,490 13,550 14,632
Other Current Assets 7,319 12,159 9,300 14,820 10,530 10,292 12,128 13,093
Cash & Equivalents 57,146 53,096 56,230 63,584 64,735 71,822 106,296 135,342
Total Current Assets 103,055 105,155 101,790 116,634 119,165 121,274 163,420 196,784
Creditors 55,063 56,850 61,860 71,700 72,060 75,300 88,798 95,893
Other Current Liabilities & Provns 36,593 12,609 12,510 17,170 15,390 15,559 17,454 18,480
Total Current Liabilities 91,656 69,459 74,370 88,870 87,450 90,859 106,252 114,373
Net Current Assets 11,399 35,696 27,420 27,764 31,715 30,415 57,168 82,411
TOTAL APPLICATION OF FUNDS 50,645 78,718 76,670 81,154 89,105 96,974 432,079 452,621
Source: Company, HSIE Research
Page | 11
Hindustan Unilever: Results Review 4QFY20
Consolidated Cash Flow (Rs mn) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E
Reported PBT 56,403 59,851 62,420 73,040 86,040 91,740 117,769 132,925
Non-operating & EO Items (2,488) (947) 290 (1,030) 140 - - -
Interest Expenses (2,183) (2,481) (2,250) (2,340) (2,740) 1,180 1,060 742
Depreciation 3,224 3,573 4,320 5,200 5,650 10,020 11,308 11,925
Working Capital Change (3,421) (1,079) 5,660 8,360 (3,420) 10,244 8,235 3,958
Tax Paid (18,616) (17,663) (18,590) (22,640) (27,670) (24,090) (30,620) (34,560)
OPERATING CASH FLOW ( a ) 32,919 41,253 51,850 60,590 58,000 89,094 107,752 114,990
Capex (5,726) (7,914) (14,520) (8,780) (7,540) (19,570) (2,015) (6,508)
Free Cash Flow (FCF) 27,193 33,340 37,330 51,810 50,460 69,524 105,737 108,483
Investments & Acquisition (907) 689 (1,420) (5,700) 390 (302,390) (5,000) (5,000)
Non-operating Income 8,012 4,542 4,210 3,850 2,770 - - -
INVESTING CASH FLOW ( b ) 1,379 (2,682) (11,730) (10,630) (4,380) (321,960) (7,015) (11,508)
Debt Issuance/(Repaid) (25) 2,117 4,600 - 990 (990) - -
Interest Expenses (177) (45) (140) (60) (70) (1,180) (1,060) (742)
FCFE 26,991 35,412 41,790 51,750 51,380 67,354 104,677 107,741
Share Capital Issuance (50) (110) - - - 317,000 - -
Dividend (29,118) (33,417) (35,720) (39,110) (45,540) (51,948) (59,667) (78,695)
Others (5,255) (6,735) (10,880) (10,580) (8,290) (9,272) (10,537) -
FINANCING CASH FLOW ( c ) (34,624) (38,190) (42,140) (49,750) (52,910) 253,610 (71,263) (79,437)
NET CASH FLOW (a+b+c) (326) 382 (2,020) 210 710 20,744 29,474 24,046
EO Items, Others 1,735 3,434 7,136 (16,354) (2,020) - - -
Closing Cash & Equivalents 26,895 27,436 18,280 34,844 37,575 59,272 88,746 112,792
Key Ratios
FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E
PROFITABILITY (%)
GPM 49.4 50.7 50.8 52.9 53.0 54.1 57.1 57.7
EBITDA Margin 16.9 18.7 19.1 21.1 22.6 24.8 26.4 27.3
EBIT Margin 15.9 17.6 17.8 19.6 21.2 22.3 24.0 25.0
APAT Margin 12.2 12.9 12.8 14.4 15.5 17.2 18.6 19.4
RoE 102.9 78.6 63.8 73.2 80.3 83.3 34.4 22.9
RoIC (or Core RoCE) na 344.6 169.5 248.5 249.8 230.7 46.5 28.8
RoCE 79.6 62.6 53.6 64.0 69.2 70.7 32.4 22.0
EFFICIENCY
Tax Rate (%) 30.8 31.2 30.1 28.1 29.2 26.3 26.0 26.0
Fixed Asset Turnover (x) 5.9 5.3 4.3 4.3 4.3 3.7 4.1 4.2
Inventory (days) 32.5 30.9 28.0 25.8 23.9 25.4 24.5 24.3
Debtors (days) 11.5 14.3 11.9 13.5 16.9 10.5 10.5 10.5
Other Current Assets (days) 8.4 13.8 10.2 15.2 9.8 9.4 9.4 9.4
Payables (days) 62.9 64.5 68.1 73.6 66.9 69.1 69.1 69.1
Other Current Liab & Provns (days) 41.8 14.3 13.8 17.6 14.3 14.3 13.6 13.3
Cash Conversion Cycle (days) (52.2) (19.7) (31.7) (36.8) (30.7) (38.0) (38.2) (38.1)
Net D/E (x) (1.4) (0.8) (0.8) (0.9) (0.8) (0.8) (0.3) (0.3)
PER SHARE DATA (Rs)
EPS 18.0 19.3 19.7 23.7 28.1 31.7 37.1 41.9
CEPS 19.5 20.9 21.7 26.1 30.7 36.3 41.9 46.9
Dividend 15.0 16.0 17.0 20.0 22.0 25.0 32.0 38.0
Book Value 18.6 30.4 31.2 33.6 36.3 39.8 178.8 187.2
VALUATION
P/E (x) 122.0 114.0 111.6 92.5 78.1 69.3 59.2 52.4
P/BV (x) 117.9 72.3 70.3 65.2 60.4 55.2 12.3 11.7
EV/EBITDA (x) 86.7 78.1 73.9 62.5 52.8 47.5 40.8 36.3
EV/Revenues (x) 14.7 14.6 14.1 13.2 11.9 11.8 10.8 9.9
OCF/EV (%) 0.7 0.9 1.1 1.3 1.2 1.9 2.1 2.3
FCF/EV (%) 0.6 0.7 0.8 1.1 1.1 1.5 2.1 2.2
FCFE/Mkt Cap (%) 0.6 0.7 0.9 1.1 1.1 1.4 2.0 2.1
Dividend Yield (%) 0.7 0.7 0.8 0.9 1.0 1.1 1.5 1.7
Source: Company, HSIE Research
Page | 12
Hindustan Unilever: Results Review 4QFY20
Rating Criteria
BUY: >+15% return potential
ADD: +5% to +15% return potential
REDUCE: -10% to +5% return potential
SELL: >10% Downside return potential
Date CMP Reco Target
10-Apr-19 1,681 NEU 1,844
4-May-19 1,693 NEU 1,804
9-Jul-19 1,740 NEU 1,817
24-Jul-19 1,693 NEU 1,804
22-Sep-19 1,969 NEU 1,960
11-Oct-19 1,969 NEU 2,036
15-Oct-19 2,015 NEU 2,017
9-Jan-20 1,935 NEU 2,021
1-Feb-20 2,034 NEU 1,988
2-Mar-20 2,175 REDUCE 2,140
13-Apr-20 2,373 REDUCE 2,113
14-Apr-20 2,350 REDUCE 2,113
1-May-20 2,196 REDUCE 1,969
From 2nd March 2020, we have moved to new rating system
RECOMMENDATION HISTORY
1,400
1,600
1,800
2,000
2,200
2,400
2,600
Ap
r-19
May
-19
Jun
-19
Jul-
19
Au
g-1
9
Sep
-19
Oct
-19
No
v-1
9
Dec
-19
Jan
-20
Feb
-20
Mar
-20
Ap
r-20
HUVR TP
Page | 13
Hindustan Unilever: Results Review 4QFY20
HDFC securities
Institutional Equities
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Senapati Bapat Marg, Lower Parel, Mumbai - 400 013
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