Download - HUL 4Q FY 2013
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Please refer to important disclosures at the end of this report 1
Quarterly results (standalone)
(` cr) 4QFY2013 4QFY2012 % yoy Angel Est. % DiffRevenue 6,367 5,660 12.5 6,354 0.2EBITDA 873 728 20 852 2.5
OPM (%) 13.7 12.9 85 13.4 31
Recurring PAT 778 659 18.1 854 (8.9)
Source: Company, Angel Research
HUL has delivered an encouraging set of numbers for 4QFY2013, with the 6%
volume growth in the domestic consumer marking a reversal in the trend of
decline in volume growth over the past few quarters. We remain Neutral on thestock.Key highlights during the quarter: The companys top-line and bottom-line roseby 12.5% and 18.1% respectively. The OPM stood at 13.7%, ahead of our
estimates of 13.4%. HUL managed to revive volume growth (6% yoy in
4QFY2013 vs 5% yoy in 3QFY2013) by passing on some benefits of reduction in
raw material costs to customers by way of price cuts, and with increased
advertising and promotion (A&P) expenditure bearing results. The Soaps and
Detergents segment grew by 12.6% yoy. The high margin Personal Products
segment rose by 12.1% yoy, while the Beverages segment grew 18.3% yoy.
HULs promoter Unilever PLC has decided to make a voluntary open offer to buy
a 22.52% stake, which would take its stake in HUL to 75%. The open offer has
been priced at `600/share. As per Unilevers CEO Paul Polman, the US$5.4bn
deal represents a further step in Unilevers strategy to invest in emerging markets
and offers a liquidity opportunity at an attractive premium for existing
shareholders. In our view, this move by Unilever indicates the huge confidence it
has on the potential of Indias consumer sector.
Outlook and valuation:We expect HUL to post an ~14.7% and 11.7% CAGR inits top-line and bottom-line respectively, over FY2013-15E. At the current marketprice, the stock is trading at 31.1x FY2015E earnings. We maintain our Neutral viewon the stock.Key financials (Standalone)
Y/E March (` cr) FY2012 FY2013E FY2014E FY2015ENet sales 21,736 25,206 29,167 33,164% chg 12.0 16.0 15.7 13.7
Net profit (Adj.) 2,573 3,188 3,695 3,978% chg 22.6 23.9 15.9 7.7
OPM (%) 13.4 13.5 13.6 13.7
EPS (`) 11.9 14.7 17.1 18.4P/E (x) 46.0 38.8 33.5 31.1
P/BV (x) 35.2 46.3 32.2 23.3
RoE (%) 83.4 103.1 113.4 87.0RoCE (%) 74.2 107.4 91.1 77.0
EV/Sales (x) 5.5 4.8 4.1 3.6
EV/EBITDA (x) 41.3 35.4 30.2 26.1
Source: Company, Angel Research
NEUTRALCMP `572
Target Price -
Investment Period -
Stock Info
Sector
(3,563)
Bloomberg Code HUVR@IN
Shareholding Pattern (%)
Promoters 52.5
MF / Banks / Indian Fls 8.5
FII / NRIs / OCBs 22.0
Indian Public / Others 17.0
Abs. (%) 3m 1yr 3yr
Sensex (1.3) 14.0 12.4
HUVR 19.8 37.5 139.5
FMCG
Market Cap (`cr) 123,769
0.3
52 Week High / Low 597/401
BSE Sensex 19,736
Nifty 5,999
Net Debt (`cr)
Reuters Code HLL.BO
Avg. Daily Volume 216,380
Face Value (`) 1
Beta
V Srinivasan022-39357800 Ext: 6831
HULPerformance Highlights
4QFY2013 Result Update | FMCG
May 2, 2013
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HUL | 4QFY2013 Result Update
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Exhibit 1:Quarterly performance (Standalone)Y/E March (` cr) 4QFY2013 4QFY2012 % chg yoy 3QFY2013 % chg qoq FY2013 FY2012 % chgNet Sales 6,367 5,660 12.5 6,434 (1.0) 25,206 21,736 16.0Consumption of RM 3,433 3,122 9.9 3,419 0.4 13,489 11,738 14.9(% of Sales) 53.9 55.2 53.1 53.5 54.0
Staff Costs 312 275 13.5 343 (8.9) 1,318 1,107 19.1
(% of Sales) 4.9 4.9 5.3 5.2 5.1
Advertising Expenses 821 677 21.2 822 (0.1) 3,232 2,635 22.7
(% of Sales) 12.9 12.0 12.8 12.8 12.1
Other Expenses 928 858 8.2 982 (5.5) 3,767 3,345 12.6
(% of Sales) 14.6 15.2 15.3 14.9 15.4
Total Expenditure 5,494 4,933 11.4 5,566 (1.3) 21,806 18,825 15.8Operating Profit 873 728 19.9 868 0.6 3,400 2,911 16.8OPM 13.7 12.9 85 13.5 23 13.5 13.4 10
Interest 6.0 0.2 2,905.0 7.5 (20.2) 25 1 1,928.2
Depreciation 61 57 7.6 59 3.6 236 218 8.1
Other Income 205 175 16.6 355 (42.4) 1,210 659 83.7
PBT (excl. Extr Items) 1,010 846 19.4 1,156 (12.6) 4,349 3,350 29.8Extr Income/(Expense) 9 28 (7) 608 119
PBT (incl. Extr Items) 1,020 874 16.6 1,148 (11.2) 4,958 3,469 42.9(% of Sales) 16.0 15.4 17.8 19.7 16.0
Provision for Taxation 232 188 23.9 277 (16.1) 1,161 778 49.3
(% of PBT) 23.0 22.2 24.0 26.7 23.2
Recurring PAT 778 659 18.1 879 (11.5) 3,188 2,573 23.9Source: Company, Angel Research
Revenue growth at 12.5% yoy
HULs Home & Personal Care (HPC) and Foods businesses registered a double
digit growth, resulting in an overall top-line growth of 12.5% yoy. Volume growth
stood at 6%.
The Soaps And Detergents segment posted a 13.0% yoy growth, with both
laundry and skin cleansing segments reporting healthy growth rates. However,
the growth of Personal Products segment continued to remain relatively weak at
12% yoy due to the slowdown in discretionary spending. Beverages grew by 18%
yoy, with tea delivering one of its strongest quarters. The Packaged Foods
segment grew by 7% yoy.
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HUL | 4QFY2013 Result Update
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Exhibit 2:Top-line grows by 12.5% yoy
Source: Company,Angel Research
Exhibit 3:Volume growth revives marginally
Source: Company, Angel Research
OPM up by 85bp yoy to 13.7%; Net profit up by 18.1% yoyDuring the quarter, HUL reported a 125bp yoy improvement in gross margin
aided by fall in prices of PFAD (a key raw material). The company increased its
A&P expenses during the quarter by`144cr yoy to `821cr. A&P expenses as a
proportion of sales stood at 12.9%, up 90bp on a yoy basis. The companys
OPM rose by 85bp on a yoy basis. During the quarter, HUL posted an 18.1%
yoy increase in its recurring net profit to `778cr (`659cr in 4QFY2012).
Exhibit 4:Recurring PAT growth remains healthy
Source: Company, Angel Research
Exhibit 5: Gross margin grows but OPM remains flat
Source: Company, Angel Research
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(`cr)
Top-line (LHS) yoy growth (RHS)
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56
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PAT (LHS) yoy growth (RHS)
12.4 11.6 12.0 13.414.7 12.9 13.4 13.3 13.5 13.7
48.945.6
44.045.7 47.3
44.846.1 46.9 46.9 46.1
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OPM Gross margin
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HUL | 4QFY2013 Result Update
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Exhibit 6:Segmental PerformanceY/E March (` cr) 4QFY2013 4QFY2012 % chg 3QFY2013 %chg FY2013 FY2012 % chgIncomeSoaps & Detergents 3,191 2,834 12.6 3,171 0.6 12,702 10,636 19.4Personal Products 1,831 1,633 12.1 2,049 (10.6) 7,472 6,585 13.5
Beverages 808 683 18.3 793 1.9 2,875 2,617 9.8
Packaged Foods 372 348 7.0 330 12.8 1,506 1,359 10.8
Others 250 260 (3.7) 290 (13.8) 1,093 897 21.8
Total Gross Income 6,453 5,759 12.1 6,633 (2.7) 25,647 22,095 16.1PBIT segment wise bifurcationSoaps & Detergents 383 320 19.7 394 (2.7) 1,616 1,233 31.0
Personal Products 472 449 5.0 579 (18.5) 1,949 1,749 11.4
Beverages 136 98 38.4 140 (3.0) 475 367 29.4
Packaged Foods 14 (4) (477) (3) (631) 37 24 53.2
Others (16) (5) 228.8 (19) (13.7) (39) (30)
Total PBIT 989 859 15 1,092 (9) 4,037 3,344 20.7Less: Interest Exp (6) (0) (8) (25) (1)
Less: Other Unallocable Exp 39 15 64 946 126
PBT 1,022 874 16.9 1,148 (11.0) 4,958 3,469 42.9PBIT Margin (%)Soaps & Detergents 12.0 11.3 12.4 12.7 11.6
Personal Products 25.8 27.5 28.3 26.1 26.6
Beverages 16.9 14.4 17.7 16.5 14.0
Packaged Foods 3.8 (1.1) (0.8) 2.5 1.8
Others (6.4) (1.9) (6.4) (3.6) (3.3)
Source: Company, Angel Research
S&D posts double-digit growth, all brands perform well
The Soaps & Detergents segment posted a healthy 12.6% and 19.7% yoy growth
in sales and profit respectively with key brands in both the skin cleansing and
laundry segments posting a double digit volume growth. Skin Cleansing sustained
its broad based growth momentum led by brands such as Dove, Lux and
Lifebuoy, which posted double digit volume growths. The company strengthened
its body wash portfolio with the relaunch of Dove. The growth in the laundry
segment was led by premium brands withSurfand Rin registering a double-digit
volume growth.
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HUL | 4QFY2013 Result Update
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Exhibit 7:S&D continues to post impressive growth
Source: Company, Angel Research
Exhibit 8:EBIT margin up by 71bp yoy
Source: Company, Angel Research
Personal products posts weak growthThe growth of Personal Products remained weak at 12% yoy due to significant
slowdown in market growth. Despite the slowdown, Ponds age miracle sustained
its strong momentum. There was broad based growth in the oral portfolio as well,
with both Close Up and Pepsodent posting double digit volume growth.
Exhibit 9:Personal products growth subdued at 12%
Source: Company, Angel Research
Exhibit 10:Segments EBIT margin expands
Source: Company, Angel Research
Foods division grows by 14.5% yoyIn the foods category, while growth in the Beverages segment was strong at 18.3%
yoy, the Packaged Foods grew by a moderate 7% yoy. In the Beverages segment,
growth was strong in both - tea and coffee. In the Packaged Foods segment
growth was led by Kissan and Knorr while Kwality Walls registered a modest
growth.
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Top-line (LHS) yoy growth (RHS)
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365
413
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579
472
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HUL | 4QFY2013 Result Update
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Unilever makes a voluntary open offer to increase stake in HUL
HULs promoter Unilever PLC has decided to make a voluntary open offer to buy
22.52% stake in the company at an offer price of `600/share. Unilever currently
holds 52.5% stake in HUL and proposes to take its total stake in the company to
75%, which is the maximum permissible promoter holding limit in a listed
company. As per Unilevers CEO Paul Polman, the US$5.4bn deal represents a
further step in Unilevers strategy to invest in emerging markets and offers a
liquidity opportunity at an attractive premium for existing shareholders. Currently,
more than 50% of Unilevers total turnover comes from emerging markets such as
India, Brazil, Indonesia, Turkey, South Africa, China etc. India contributes ~7% of
Unilevers total turnover. In our view, this move by Unilever indicates the huge
confidence it has over the potential of Indias consumer sector
Investment arguments
Increasing innovation and brand repositioning to accelerate growth: HUL hasbeen very actively re-launching products from its existing brands and has
increased the pace of new launches, targeting the mid/premium market
segment. This, in our view, is positive, considering that the company will have
a better control on pricing. Moreover, constant innovations have helped HUL
stabilize its market share losses.
Healthy domestic growth rates and strong balance sheet provide furtherimpetus: HUL, with its iconic brands, has maintained its growth which isimpressive given the recent price hikes across categories and a strongcompetitive scenario, indicating a revival in consumer demand and highergrowth in the mid/premium market segment. Moreover, HUL is a
cash-rich, zero-debt company enjoying a high RoE .
Outlook and valuation
We expect HUL to post an ~14.7% and 11.7% CAGR in its top-line and
bottom-line respectively over FY2013-15E. At the current market price, the stock istrading at 31.1x FY2015E earnings. We maintain our Neutral view on the stock.
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Exhibit 11: Peer valuationCompany Reco Market CMP TP Upside P/E (x) EV/Sales (x) RoE (%) CAGR#
Cap ` ` (%) FY14E FY15E FY14E FY15E FY14E FY15E Sales PATAsian Paints Neutral 45,337 4,727 - - 32.9 27.8 3.3 2.7 35.0 32.7 18.8 18.0
Britannia Neutral 6,874 576 - - 28.4 22.9 1.0 0.8 37.4 37.3 15.5 22.0
Colgate Neutral 20,466 1,505 - - 33.6 29.0 5.5 4.7 98.3 88.0 15.1 17.4
Dabur India Neutral 26,210 151 - - 27.8 23.8 3.6 3.0 43.9 39.9 16.0 19.7
Godrej Con Neutral 28,580 840 - - 31.7 26.3 3.8 3.1 26.5 25.9 18.8 22.2
GSK Con Neutral 17,557 4,175 - - 34.6 28.5 4.5 3.5 33.7 33.4 17.6 18.7
HUL* Neutral 123,771 572 - - 33.5 31.1 4.1 3.5 113.4 87.0 14.7 11.7ITC Neutral 260,705 333 - - 30.1 25.7 7.4 6.0 35.5 34.1 15.3 16.6
Marico Neutral 14,222 221 - - 27.9 22.5 2.6 2.1 22.8 22.9 14.8 23.3
Nestle Neutral 47,465 4,923 - - 37.4 30.8 4.7 4.0 58.8 69.5 16.7 18.4
TGBL Neutral 9,202 149 - - 18.9 17.1 1.1 0.5 9.5 9.8 10.0 13.0
Source: Angel Research; # CAGR over FY2013-15E
Exhibit 12:Angel vs Consensus estimatesTop-line (` cr) FY2014E FY2015E EPS (`) FY2014E FY2015EAngel estimates 29,167 33,164 Angel estimates 17.1 18.4
Consensus 29,158 32,959 Consensus 16.9 18.3
Diff (%) 0.0 0.6 Diff (%) 1.3 0.6
Source: Bloomberg, Angel Research
Exhibit 13:One-year forward P/E chart
Source: Company, Angel Research
Exhibit 14:One-year forward premium to Sensex
Source: Company, Angel Research, Note: Blue line indicates 5-year average
Company Background
HUL, a 52% subsidiary of Unilever, is one of India's largest consumer goods
companies. HUL is present across four main product categories 1) Soaps And
Detergents (50% of revenue); 2) Personal Products (mainly shampoos, skin care
and toothpaste; 30% of revenue); 3) Beverages (mainly tea and coffee; 12% of
revenue); 4) Packaged Foods and ice cream (6% of revenue); and 5) Others,
mainly consisting of water purifiers. The company, with its iconic brands such as
Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Vaseline, Lakm, Dove,
Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan andWalls, has a vast presence in rural as well as urban Indian markets, with one of the
largest distribution networks spanning over 6.3mn retail outlets.
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HUL | 4QFY2013 Result Update
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Profit & Loss Statement (Standalone)
Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015ENet Sales 17,524 19,401 21,736 25,206 29,167 33,164
Total operating income 17,524 19,401 21,736 25,206 29,167 33,164% chg (13.4) 10.7 12.0 16.0 15.7 13.7
Total Expenditure 14,975 17,036 18,825 21,806 25,195 28,613
Cost of Materials 8,878 10,057 11,738 13,489 15,517 17,643
Advertising Exp 2,391 2,764 2,635 3,232 3,733 4,212
Personnel 936 961 1,107 1,318 1,473 1,675
Others 2,770 3,254 3,345 3,767 4,471 5,084
EBITDA 2,548 2,365 2,911 3,400 3,973 4,550% chg (4.1) (7.2) 23.1 16.8 16.8 14.5
(% of Net Sales) 14.5 12.2 13.4 13.5 13.6 13.7
Depreciation& Amortisation 184 221 218 236 228 259
EBIT 2,364 2,144 2,692 3,164 3,745 4,291% chg (3.9) (9.3) 25.6 17.5 18.4 14.6
(% of Net Sales) 13.5 11.1 12.4 12.6 12.8 12.9
Interest & other Charges 7 0 1 25 33 33
Other Income 350 586 659 1,211 1,255 1,238
(% of PBT) 12.9 21.5 19.7 27.8 25.3 22.5
Share in profit of Associates - - - - - -
Recurring PBT 2,707 2,730 3,350 4,349 4,967 5,496% chg (10.5) 0.9 22.7 29.8 14.2 10.6
Prior Period & Extr. Exp./(Inc.) (99) (207) (119) (608) - -
PBT (reported) 2,806 2,937 3,469 4,957 4,967 5,496Tax 604 631 778 1,161 1,272 1,517
(% of PBT) 22.3 23.1 23.2 26.7 25.6 27.6
PAT (Adjusted) 2,103 2,099 2,573 3,188 3,695 3,978Add: Share of earnings of asso. - - - - - -
Recurring PAT 2,103 2,099 2,573 3,188 3,695 3,978Reported PAT 2,202 2,306 2,691 3,796 3,695 3,978% chg (11.8) 4.7 16.7 41.0 (2.7) 7.7
(% of Net Sales) 12.6 11.9 12.4 15.1 12.7 12.0
Basic EPS (`) 9.6 9.7 11.9 14.7 17.1 18.4Fully Diluted EPS (`) 9.6 9.7 11.9 14.7 17.1 18.4% chg (16.0) 0.9 22.4 23.9 15.9 7.7
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Balance Sheet (Standalone)
Y/E March (` cr) FY2010 FY2011 FY2012 FY2013E FY2014E FY2015ESOURCES OF FUNDSEquity Share Capital 218 216 216 216 216 216Preference Capital - - - - - -
Reserves& Surplus 2,365 2,444 3,297 2,458 3,626 5,092
Shareholders Funds 2,584 2,660 3,513 2,674 3,843 5,308Total Loans - - - - - -
Deferred Tax Liability (249) (210) (214) (205) (210) (210)
Long term provisions 664 667 700 700 700
Other long term liabilities 219 330 476 476 476
Total Liabilities 2,335 3,333 4,295 3,645 4,809 6,275APPLICATION OF FUNDSGross Block 3,582 3,760 3,812 4,012 4,137 4,704
Less: Acc. Depreciation 1,420 1,591 1,664 1,900 2,128 2,386
Net Block 2,162 2,169 2,147 2,112 2,009 2,318Capital Work-in-Progress 274 289 215 397 414 470
Goodwill - - - - - -
Investments 1,264 1,261 2,438 2,331 3,031 4,031Long term loans and adv. 400 396 420 450 450
Current Assets 5,368 5,834 5,547 6,048 6,703 7,515
Cash 1,892 1,628 1,830 1,708 1,507 1,545
Loans & Advances 624 452 521 980 717 877
Other 2,852 3,754 3,196 3,360 4,479 5,093
Current liabilities 6,733 6,620 6,449 7,662 7,797 8,508
Net Current Assets (1,365) (786) (902) (1,614) (1,095) (994)Total Assets 2,335 3,333 4,295 3,645 4,809 6,275
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Cash Flow Statement (Standalone)
Y/E March (` cr) FY2010 FY2011 FY2012 FY2013E FY2014E FY2015EProfit before tax 2,707 2,730 3,350 4,349 4,967 5,496
Depreciation 184 221 218 236 228 259Change in Working Capital 1,375 (538) 205 361 (718) (124)
Interest / Dividend (Net) (117) (190) (161) (154) (198) (47)
Direct taxes paid 604 631 778 1,161 1,272 1,517
Others (67) (142) 208 1,016 (50) 61
Cash Flow from Operations 3,477 1,450 3,043 4,647 2,956 4,127(Inc.)/ Dec. in Fixed Assets (502) (192) 21 (382) (142) (624)
(Inc.)/ Dec. in Investments (931) 3 (1,178) 108 (700) (1,000)
Cash Flow from Investing (1,434) (189) (1,156) (274) (842) (1,624)Issue of Equity 32 (73) 38.1 0.1 - -
Inc./(Dec.) in loans (422) - - - - -
Dividend Paid (Incl. Tax) 1,656 1,642 1,884 4,649 2,513 2,513
Interest / Dividend (Net) (117) (190) (161) (154) (198) (47)
Cash Flow from Financing (1,929) (1,525) (1,685) (4,494) (2,315) (2,466)Inc./(Dec.) in Cash 115 (264) 201 (122) (201) 38
Opening Cash balances 1,777 1,892 1,628 1,830 1,708 1,507Closing Cash balances 1,892 1,628 1,830 1,708 1,507 1,545
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Key Ratios
Y/E March FY2010 FY2011 FY2012 FY2013E FY2014E FY2015EValuation Ratio (x)P/E (on FDEPS) 56.7 53.6 46.0 38.8 33.5 31.1P/CEPS 54.1 53.3 44.3 36.1 31.5 29.2
P/BV 47.9 46.5 35.2 46.3 32.2 23.3
Dividend yield (%) 1.1 1.1 1.3 3.2 1.7 1.7
EV/Sales 6.9 6.3 5.5 4.8 4.1 3.6
EV/EBITDA 47.8 51.4 41.3 35.4 30.2 26.1
EV / Total Assets 52.1 45.6 33.1 40.9 29.2 21.3
Per Share Data (`)EPS (Basic) 9.6 9.7 11.9 14.7 17.1 18.4
EPS (fully diluted) 9.7 9.7 11.9 14.7 17.1 18.4
Cash EPS 10.6 10.7 12.9 15.8 18.1 19.6
DPS 6.5 6.5 7.5 18.5 10.0 10.0
Book Value 12.0 12.3 16.3 12.4 17.8 24.6
Returns (%)ROCE (Pre-tax) 103.6 85.7 85.5 96.3 106.2 88.6
Angel ROIC (Pre-tax) - - - - - -
ROE 90.5 80.1 83.4 103.1 113.4 87.0
Turnover ratios (x)Asset Turnover (Gross Block) 4.9 5.2 5.7 6.3 7.1 7.1
Inventory / Sales (days) 45 53 42 46 46 46
Receivables (days) 14 18 11 9 10 10
Payables (days) 110 105 87 84 78 76
WC cycle (ex-cash) (days) (68) (50) (50) (52) (36) (31)
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Source: Company, Angel Research
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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Disclosure of Interest Statement HUL
1. Analyst ownership of the stock No
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Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)
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