CMP (Rs) 499.80

Target Price (Rs) 545.00

ISIN: INE030A01027

APRIL 29th

, 2013

HINDUSTAN UNILEVER LIMITED

Result Update: Q4 FY13

BUYBUYBUYBUY

Stock Data

Sector FMCG

BSE Code 500696

Face Value 1.00

52wk. High / Low (Rs.) 579.60/406.50

Volume (2wk. Avg ) 119000

Market Cap ( Rs in mn ) 1080817.50

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY13A FY14E FY15E

Net Sales 258102.10 292687.78 324883.44

EBITDA 52190.50 56432.82 61923.91

Net Profit 37966.70 41325.03 45300.05

EPS 17.56 19.11 20.95

P/E 28.47 26.15 23.86

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX HUL LTD

SYNOPSIS

Hindustan Unilever Limited (HUL) is India's

largest Fast Moving Consumer Goods Company

with a heritage of over 75 years in India and

touches the lives of two out of three Indians.

Hindustan Unilever business in Mumbai is

investing €50 million to set up its first Asian

aerosol deodorant manufacturing facility in

Khamgaon, Maharashtra.

During the quarter, the robust growth of Net

Profit is increased by 14.65% to Rs. 7872.00

million.

During the quarter, Domestic Consumer

Business (FMCG + Water) grew by 13.0% with a

12.7% growth in HPC and 15.1% growth in

Foods businesses.

Soaps & Detergents category grew by 13%

during the quarter.

HUL has recommended a final dividend of Rs.

6.00 for the financial year ended March 31, 2013

on Equity Shares of Re. 1/- each.

Hindustan Unilever Ltd has entered into a Share

Purchase Agreement with the promoters of M/s.

Aquagel Chemicals Private Limited (ACPL) for

acquisition of 74% of the equity share capital of

ACPL.

Net Sales and PAT of the company are expected

to grow at a CAGR of 14% and 19% over 2012 to

2015E respectively.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Hindustan Unilever Limited 499.80 1080817.50 17.56 28.47 40.43 750.00

Dabur India Ltd 146.95 256124.30 3.23 45.50 19.67 130.00

Marico Ltd 222.80 143656.60 6.30 35.37 12.75 70.00

Godrej Consumer Products Ltd 855.80 291251.80 15.25 56.12 11.54 475.00

Investment Highlights

Results updates- Q4 FY13,

Hindustan Unilever Limited (HUL) is India's largest Fast

Moving Consumer Goods Company with a heritage of

over 75 years in India and touches the lives of two out of

three Indians, reported its financial results for the

quarter ended 31st MARCH, 2013.

The company’s net profit jumps to Rs.7872.00 million against Rs.6866.10 million in the corresponding quarter

ending of previous year, an increase of 14.65%. Revenue for the quarter rose 12.14% to Rs.64658.10 million

from Rs.57659.00 million, when compared with the prior year period. Reported earnings per share of the

company stood at Rs. 3.64 a share during the quarter, registering 14.60% increase over previous year period.

EBITDA is Rs.10870.10 millions as against Rs.9314.30 millions in the corresponding period of the previous year.

Expenditure :

Break up of Expenditure

Rs. Millions

Q4 FY13 Q4 FY12

Advertising & promotion 8211.30 9820.80

Other Expenses 9280.70 9820.80

Cost of Material Consumed 25290.60 25519.00

Employee Benefit Expenses 3122.80 3427.10

Depreciation & Amortization Expense

614.20 592.80

Purchase of Stock in Trade 8283.60 7837.90

Months MAR-13 MAR-12 % Change

Net Sales 64658.10 57659.00 12.14%

PAT 7872.00 6866.10 14.65%

EPS 3.64 3.18 14.60%

EBITDA 10870.10 9314.30 16.70%

Segment Revenue

Latest Updates

• Hindustan Unilever Ltd has recommended a final dividend of Rs. 6.00 for the financial year ended March 31,

2013 on Equity Shares of Re. 1/- each.

• Hindustan Unilever business in Mumbai is investing €50 million to set up its first Asian aerosol deodorant

manufacturing facility in Khamgaon, Maharashtra.

• Skin Cleansing delivered a robust performance with double digit volume growth in Dove, Lux and Lifebuoy.

Soaps & Detergents category grew by 13% during the quarter.

• During the quarter, Domestic Consumer Business (FMCG + Water) grew by 13.0% with a 12.7% growth in

HPC and 15.1% growth in Foods businesses.

• Beverages and Packaged Foods segment of HUL grew by 18% and 7% respectively during the quarter.

• Hindustan Unilever Ltd has entered into a Share Purchase Agreement with the promoters of M/s. Aquagel

Chemicals Private Limited (ACPL) for acquisition of 74% of the equity share capital of ACPL. The Company

was earlier holding an investment to the extent of 26% of the equity share capital of ACPL. Consequent to the

acquisition of remaining 74% of the equity share capital, ACPL has become a wholly owned subsidiary of

Hindustan Unilever Ltd with effect from April 01, 2013.

• Financial Year 2012-13

The Company has posted a net profit of Rs. 37966.70 million for the Year ended March 31, 2013 as compared

to Rs. 26914.00 million for the Year ended March 31, 2012. Total Income has increased from Rs. 223946.80

million for the Year ended March 31, 2012 to Rs. 264171.10 million for the Year ended March 31, 2013.

Company Profile

Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods Company with a heritage of

over 75 years in India and touches the lives of two out of three Indians. HUL works to create a better future every

day and helps people feel good, look good and get more out of life with brands and services that are good for

them and good for others.

With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care, toothpastes,

deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers, the Company is a part of the

everyday life of millions of consumers across India. Its portfolio includes leading household 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 Company has over 16,000 employees and has an annual turnover of around Rs. 21,736 crores (financial year

2011 - 2012). HUL is a subsidiary of Unilever, one of the world’s leading suppliers of fast moving consumer goods

with strong local roots in more than 100 countries across the globe with annual sales of about €46.5 billion in

2011. Unilever has about 52% shareholding in HUL.

In April, 2012, the Customer Insight & Innovation Centre (CiiC) was inaugurated at the Hindustan Unilever

campus at Andheri, Mumbai.

In 2011 Uniliver spent €1 billion on research & development. Currently the company has over 6000 people

working in R&D in all Unilever regions across the globe. The company typically files between 250 & 350 new

patent applications a year. Worldwide the company has over 20 000 registered patents & patent applications.

Brands:

• Food Brands

• Home Care Brands

• Personal Care Brands

• Water

• Nutrition

• Health, Hygiene & Beauty

Products

� Food Products

� Brooke Bond 3 Roses

� Brooke Bond Red Label

� Brooke Bond Taj Mahal

� Kissan

� Kwality Wall’s

� Modern

� Annapurna

� Brooke Bond Taaza

� Bru

� Knorr

� Lipton

� Brooke Bond Sehatmand

� Home care brands

� Active Wheel

� Cif

� Comfort Fabric Conditioner

� Domex

� Rin

� Sunlight

� Surf Excel

� Vim

� Personal care brands

� Aviance

� Axe

� LEVER Ayush Therapy

� Breeze

� Clear

� Clinic Plus

� Closeup Gel Toothpaste

� Dove

� Fair & Lovely

� Hamam

� Liril 2000

� Lux

� Pears

� Pepsodent

� Sunsilk

� Ponds

� Rexona

� Vaseline

� Water

� Pureit Marvella RO

� Pureit Marvella

� Pureit Classic 14 litres

� Pureit Classic 23 litres

Financial Highlights

Balance sheet as at March31st, 2012

(A*- Actual, E* -Estimations & Rs. In Millions)

FY12 FY13 FY14E FY15E

EQUITY AND LIABILITIES:

Shareholders’ Funds:

Share Capital 2161.50 2162.50 2162.50 2162.50

Reserves and Surplus 32967.80 24577.70 32925.14 42802.68

Net worth (a) 35129.30 26740.20 35087.64 44965.18

Non-Current Liabilities:

Other Long Term Liabilities 3296.90 4762.50 5715.00 6743.70

Long Term Provisions 6669.50 7063.40 7345.94 7588.35

Long term liabilities (b) 9966.40 11825.90 13060.94 14332.05

Current Liabilities:

Trade Payables 46229.60 51676.90 56069.44 59994.30

Other Current Liabilities 5467.70 6161.50 6777.65 7414.75

Short Term Provisions 12789.70 18720.20 22277.04 25618.59

Current Liabilities © 64487.00 76558.60 85124.12 93027.64

Total (a+b+c) 109582.70 115124.70 133272.70 152324.87

ASSETS:

Non-Current Assets:

Fixed Assets 23629.20 25085.40 29262.46 33651.83

(d) 23629.20 25085.40 29262.46 33651.83

Deferred tax assets 2142.40 2047.80 2170.67 2235.79

other non-current assets 0.00 2968.40 0.00 0.00

Non Current Investments 1863.10 5480.30 9261.71 11391.90

Long Term Loans and Advances 4012.70 3842.90 4035.05 4196.45

(e) 8018.20 14339.40 15467.42 17824.13

Current Assets:

Current Investments 22519.00 17826.30 21213.30 24607.42

Inventories 25166.50 25269.90 26533.40 27727.40

Trade Receivables 6789.90 8334.80 10668.54 13015.62

Cash and Bank Balances 18300.40 17078.90 19640.74 21604.81

Short Term Loans and Advances 4807.00 6482.60 9270.12 11865.75

Other Current Assets 352.50 707.40 1216.73 2027.90

(f) 77935.30 75699.90 88542.82 100848.91

Total (d+e+f) 109582.70 115124.70 133272.70 152324.87

Annual Profit & Loss Statement for the period of 2012 to 2015E

Value(Rs.in.mn) FY12 FY13 FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 221163.70 258102.10 292687.78 324883.44

Other Income 2783.10 6069.00 6675.90 7343.49

Total Income 223946.80 264171.10 299363.68 332226.93

Expenditure -187061.60 -211980.60 -242930.86 -270303.02

Operating Profit 36885.20 52190.50 56432.82 61923.91

Interest -12.40 -251.50 -309.35 -386.68

Gross profit 36872.80 51939.00 56123.48 61537.23

Depreciation -2182.50 -2360.20 -2454.61 -2552.79

Profit Before Tax 34690.30 49578.80 53668.87 58984.43

Tax -7776.30 -11612.10 -12343.84 -13684.39

Net Profit 26914.00 37966.70 41325.03 45300.05

Equity capital 2161.50 2162.50 2162.50 2162.50

Reserves 32961.10 24571.00 32925.14 42802.68

Face value 1.00 1.00 1.00 1.00

EPS 12.45 17.56 19.11 20.95

Quarterly Profit & Loss Statement for the period of 30th Sep, 2012 to 30 June, 2013E

Value(Rs.in.mn) 30-Sep-12 31-Dec-12 31-Mar-13 30-June-13E

Description 3m 3m 3m 3m

Net sales 63108.10 66548.30 64658.10 69830.75

Other income 1487.50 1337.10 1058.30 1121.80

Total Income 64595.60 67885.40 65716.40 70952.55

Expenditure -53324.90 -55733.20 -54846.30 -57959.52

Operating profit 11270.70 12152.20 10870.10 12993.03

Interest -63.30 -75.30 -60.10 -54.09

Gross profit 11207.40 12076.90 10810.00 12938.94

Depreciation -576.90 -592.80 -614.20 -620.34

Profit Before Tax 10630.50 11484.10 10195.80 12318.59

Tax -2561.30 -2770.50 -2323.80 -2894.87

Net Profit 8069.20 8713.60 7872.00 9423.72

Equity capital 2161.90 2162.00 2162.50 2162.50

Face value 1.00 1.00 1.00 1.00

EPS 3.73 4.03 3.64 4.36

Ratio Analysis

Particulars FY12 FY13 FY14E FY15E

EPS (Rs.) 12.45 17.56 19.11 20.95

EBITDA Margin (%) 16.68% 20.22% 19.28% 19.06%

PBT Margin (%) 15.69% 19.21% 18.34% 18.16%

PAT Margin (%) 12.17% 14.71% 14.12% 13.94%

P/E Ratio (x) 40.14 28.47 26.15 23.86

ROE (%) 76.63% 142.02% 117.78% 100.74%

ROCE (%) 111.23% 204.05% 167.83% 143.39%

EV/EBITDA (x) 28.79 20.38 18.80 17.11

Book Value (Rs.) 16.25 12.36 16.23 20.79

P/BV 30.76 40.43 30.80 24.04

Charts

Outlook and Conclusion

� At the current market price of Rs.499.80, the stock P/E ratio is at 26.15 x FY14E and 23.86 x FY15E

respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.19.11 and

Rs.20.95 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 19% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 18.80 x for FY14E and 17.11 x for FY15E.

� Price to Book Value of the stock is expected to be at 30.80 x and 24.04 x respectively for FY14E and FY15E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.545.00 for Medium to Long term

investment.

Industry Overview

Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this

category include all consumables (other than groceries/pulses) people buy at regular intervals. The most

common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged

foodstuff, and household accessories and extends to certain electronic goods. These items are meant for daily of

frequent consumption and have a high return.

A major portion of the monthly budget of each household is reserved for FMCG products. The volume of money

circulated in the economy against FMCG products is very high, as the number of products the consumer use is

very high. Competition in the FMCG sector is very high resulting in high pressure on margins.

FMCG companies maintain intense distribution network. Companies spend a large portion of their budget on

maintaining distribution networks. New entrants who wish to bring their products in the national level need to

invest huge sums of money on promoting brands. Manufacturing can be outsourced. A recent phenomenon in the

sector was entry of multinationals and cheaper imports. Also the market is more pressurized with presence of

local players in rural areas and state brands

Scope of the Sector

The Indian FMCG sector with a market size of Rs.1,35,000 crore is the fourth largest sector in the economy. A

well-established distribution network, intense competition between the organized and unorganized segments

characterizes the sector.

The Rs.1,35,000 crore FMCG market in India is growing at a fast pace despite of the economic downtrend. The

increasing disposable income and improved standard of living in most tier II and tire III cities are spearheading

the FMCG growth across the nation. The changing profile and mind set of the consumers has shifted the thought

to “Value for Money” from “Money for Value”.

According to a FICCI-Technopak report, India's FMCG sector is poised to reach US$ 43 billion by 2013 and US$ 74

billion by 2018. The report states that implementation of the proposed goods and services tax (GST) and the

opening of foreign direct investment (FDI) are expected to fuel growth further and raise the industry's size to

US$ 47 billion by 2013 and US$ 95 billion by 2018.

According to a study by research firm The Nielson Company, the fast moving consumer goods market (FMCG) in

rural India is tipped to touch US$100 billion by 2025 on the back of "unrelenting" demand driven by rising

income levels. According to the study, rural India accounts for more than half of sales in some of the largest FMCG

categories.

At present, rural consumers spend about US$ 9 billion per annum on FMCG items and product categories such as

instant noodles, deodorant and fabric, with the pace of consumption growing much faster than urban areas, as

per the findings.

“The industry will witness a spate of acquisitions & mergers in the 2010. There will be a renewed focus on rural

consumers too,” by an analyst based in Mumbai.

The fast moving consumer goods (FMCG) sector is expected to grow 13 per cent during FY 2010-11 on the back

of strong economic growth, a good monsoon and subsequent rise in rural income, according to an industry body.

Over the years companies like HUL, ITC and Dabur have improved performance with innovation and strong

distribution channels. Their key categories have strengthened their presence and outperformed peers in the

FMCG sector. On the contrary, Colgate Palmolive and Britannia Industries are strong in single product category

i.e. tooth pastes and Biscuits. In addition companies have been successful in reviving their presence in the semi-

urban and rural markets.

Major investments

Some of the major investments in the industry are:

• Chennai-based FMCG Company CavinKare is planning to invest around US$ 109.50 million over the next two

years in various expansion plans, including a greenfield facility for namkeen at Thane, cool drinks in the

North and others.

• Nestle, the fast moving consumer goods major, plans to invest US$ 50.49 million to set up its first research

and development (R&D) centre in India at Manesar in adjoining Gurgaon district. The facility will be made

operational by July 2012.

• Packaged consumer goods company GlaxoSmithKline Consumer Healthcare (GSKCH) plans to invest over US$

64.87 million on repositioning milk food drink Horlicks as the company’s umbrella brand.

• FieldFresh Foods , joint venture of the Bharti Enterprises and Del Monte Pacific Ltd, has inaugurated their

Research and Development and manufacturing facility in Hosur, Tamil Nadu at an investment of US$ 25.93

million.

• Agri solutions provider Buhler India plans to invest US$ 22.55 million in an integrated manufacturing unit

and other expansion projects in the next four years, in line with its plans to achieve US$ 225.49 million

turnover by 2014.

• Soft drinks and snacks major Pepsico is planning to invest US$ 500 million in India in the next two years.

• Atlanta-based Coca Cola Company plans to invest up to US$ 120.75 million to set up a new bottling plant in

Karnataka, India

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

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