1QFY2017 Result Update | FMCG
July 20, 2016
Hindustan Unilever
NEUTRAL
CMP
`895
Performance Highlights
Target Price
-
Quarterly Data
Investment Period
-
(` cr)
1QFY17
1QFY16
% yoy
4QFY16
% qoq
Revenue
8,128
7,844
3.6
7,721
5.3
Stock Info
EBITDA
1,591
1,511
5.3
1,470
8.2
Sector
FMCG
Margin (%)
19.6
19.3
32
19.0
54
Market Cap (` cr)
193,732
Reported PAT
1,174
1,069
9.8
1,114
5.4
Source: Company, Angel Research
Net Debt (` cr)
(5,798)
Beta
0.6
Hindustan Unilever (HUL)’s performance for 1QFY2017 was slightly below
52 Week High / Low
949 / 765
consensus expectations. For the quarter, the company’s top-line grew by 3.6% yoy
Avg. Daily Volume
100,030
to `8,128cr while the reported PAT grew ~10% yoy to `1,174cr.
Face Value (`)
1
Key highlights: For 1QFY2017, HUL’s overall top-line rose by 3.6% yoy to
BSE Sensex
27,788
`8,128cr on the back of 4% volume growth. The Soaps & Detergents division
Nifty
8,529
posted a 6.8% yoy growth to `2,560cr, driven by healthy volume growth. The
Reuters Code
HLL.BO
Fabric Wash category’s revenue growth came in double digits, largely on the
Bloomberg Code
[email protected]
back of strong acceptance of premium products. Further, Household Care (Vim)
continued to do well. In the Personal Products segment, HUL grew ~2% yoy due
Shareholding Pattern (%)
to a challenging environment. Beverages and Packaged Foods reported modest
Promoters
67.2
growth of ~5% yoy each.
MF / Banks / Indian Fls
5.0
FII / NRIs / OCBs
14.0
The company posted a weak operating performance for the quarter with the
Indian Public / Others
13.8
operating profit reporting a growth of 5.3% yoy. Further, the operating profit
margin increased by 32bp yoy to 19.6% due to lower material costs & ad spend.
On the bottom-line front, the company reported a net profit growth of ~10%.
Abs. (%)
3m 1yr
3yr
Sensex
7.5
(2.4)
37.8
Outlook and valuation: We expect HUL to post a ~8% and ~7% CAGR in its top-
HUL
(0.2)
(1.9)
29.9
line and bottom-line respectively, over FY2016-18E. At the current market price,
the stock is trading at 40.9x its FY2018E earnings. We maintain our Neutral view
3-year price chart
on the stock.
1,200
1,000
Key financials (Consolidated)
800
Y/E March (` cr)
FY2015
FY2016
FY2017E
FY2018E
600
Net sales
31,972
33,194
35,252
38,495
400
% chg
9.4
3.8
6.2
9.2
200
Net profit
3,893
4,109
4,420
4,739
0
% chg
3.3
5.6
7.6
7.2
EBITDA margin (%)
16.9
17.8
17.6
17.4
Source: Company, Angel Research
EPS (`)
18.0
19.0
20.4
21.9
P/E (x)
49.8
47.1
43.8
40.9
P/BV (x)
48.2
41.5
36.0
31.6
RoE (%)
108.5
87.4
82.2
77.3
RoCE (%)
125.3
112.8
103.5
98.5
Amarjeet S Maurya
EV/Sales (x)
5.9
5.7
5.3
4.8
022-39357800 Ext: 6831
EV/EBITDA (x)
34.7
31.8
30.2
27.9
[email protected]
Source: Company, Angel Research; Note: CMP as of July 19, 2016
Please refer to important disclosures at the end of this report
1
Hindustan Unilever | 1QFY2017 Result Update
Exhibit 1: Standalone quarterly performance
Y/E March (` cr)
1QFY17
1QFY16
% yoy
4QFY16
% qoq
FY2016
FY2015
% chg
Net Sales
8,128
7,844
3.6
7,721
5.3
31,987
30,806
3.8
Consumption of RM
3,955
3,898
1.5
3,769
5.0
15,313
15,624
(2.0)
(% of Sales)
48.7
49.7
48.8
47.9
50.7
Staff Costs
427
358
19.2
443
(3.6)
1,592
1,579
0.8
(% of Sales)
5.2
4.6
5.7
5.0
5.1
Advertising
880
893
(1.5)
865
1.7
4,526
3,872
16.9
(% of Sales)
10.8
11.4
11.2
14.1
12.6
Other Expenses
1,275
1,185
7.6
1,174
8.6
4,865
4,536
7.2
(% of Sales)
15.7
15.1
15.2
15.2
14.7
Total Expenditure
6,537
6,333
3.2
6,251
4.6
26,296
25,611
2.7
Operating Profit
1,591
1,511
5.3
1,470
8.2
5,691
5,194
9.6
OPM
19.6
19.3
19.0
17.8
16.9
Interest
5.95
5
27.4
1.58
276.6
0
17
(98.9)
Depreciation
93
75
24.5
88
6.6
321
287
11.9
Other Income
223
134
66.6
153
46.0
501
1,297
(61.4)
PBT (excl. Ext Items)
1,715
1,565
9.6
1,534
11.8
5,871
6,187
(5.1)
Ext (Income)/Expense
-
-
-
-
-
PBT (incl. Ext Items)
1,715
1,565
9.6
1,534
11.8
5,871
6,187
(5.1)
(% of Sales)
21.1
20.0
19.9
18.4
20.1
Provision for Taxation
541
496
420
1,788
1,872
(4.5)
(% of PBT)
31.6
31.7
27.4
30
30
Reported PAT
1,174
1,069
9.8
1,114
5.4
4,082
4,315
(5.4)
PATM
14.4
13.6
14.4
12.8
14.0
Equity shares (cr)
216
216
216
216
216
FDEPS (`)
5.4
4.9
9.8
5.1
5.4
18.9
19.9
(5.4)
Source: Company, Angel Research
July 20, 2016
2
Hindustan Unilever | 1QFY2017 Result Update
Exhibit 2: Segmental Performance
1QFY2017
1QFY2016
% chg
4QFY2016
% chg 9MFY16 9MFY15
% chg
Income
Soaps & Detergents
2,560
2,397
6.8
3,753
(31.8)
15,053
14,877
1.2
Personal Products
3,899
3,817
2.1
2,312
68.6
9,656
9,006
7.2
Beverages
1,191
1,130
5.4
1,036
15.0
3,888
3,631
7.1
Packaged Foods
267
255
4.7
533
(49.9)
2,117
1,892
11.9
Others
198
236
(16.2)
303
(34.9)
1,235
1,313
(6.0)
Total Gross Income
8,114
7,835
7,937
31,949
30,719
PBIT segment -wise bifurcation
Soaps & Detergents
356
290
22.7
545
(34.7)
2,142
2,034
5.3
Personal Products
1,021
1,018
0.3
682
49.7
2,755
2,424
13.7
Beverages
192
179
7.5
199
(3.4)
653
615
6.2
Packaged Foods
17
21
(20.7)
30
(44.3)
127
83
52.3
Others
(9)
(2)
340.5
(8)
21.6
(37)
(15)
140.5
Total PBIT
1,577
1,506
1,449
5,640
5,140
Less: Interest Exp
6
5
(0)
(0)
(17)
Less: Other Unallocable Exp
144
63
56
231
1,064
PBT
1,715
1,565
1,504
5,870
6,187
PBIT Margin (%)
Soaps & Detergents
13.9
12.1
14.5
14.2
13.7
Personal Products
26.2
26.7
29.5
28.5
26.9
Beverages
16.1
15.8
19.2
16.8
16.9
Packaged Foods
6.4
8.4
5.7
6.0
4.4
Others
(4.8)
(0.9)
(2.6)
(3.0)
(1.2)
Source: Company, Angel Research
Overall top-line growth flattish
For 1QFY2017, HUL’s overall top-line rose by 3.6% yoy to `8,128cr on the back
of 4% volume growth. The Soaps & Detergents division posted a 6.8% yoy growth
to `2,560cr, driven by healthy volume growth. The Fabric Wash category’s
revenue growth came in double digits, largely on the back of strong acceptance of
premium products. Further, Household Care (Vim) continued to do well. In the
Personal Products segment, HUL grew ~2% yoy due to a challenging environment.
Beverages and Packaged Foods reported a modest growth of ~5% yoy each.
July 20, 2016
3
Hindustan Unilever | 1QFY2017 Result Update
Exhibit 3: Top-line growth trend
10
8,400
8,200
8
8,000
7,800
6
7,600
4
7,400
2
7,200
7,000
-
6,800
(2)
6,600
6,400
(4)
Net Sales
QoQ growth (%)
Source: Company, Angel Research
Operating margin improved due to lower raw material cost
and ad spend
The company reported a 5% yoy growth in its operating profit for the quarter while
the operating profit margin improved by 32bp yoy to 19.6% due to lower material
cost and ad spend.
Exhibit 4: Operating profit and margin trend
1,800
25
1,600
20
1,400
1,200
15
1,000
800
10
600
400
5
200
0
0
Operating Profit
Margin (%)
Source: Company, Angel Research
July 20, 2016
4
Hindustan Unilever | 1QFY2017 Result Update
Reported PAT grew ~10% yoy
On the bottom-line front, the company reported a net profit growth of
10% yoy on back of volume growth of 4%; the performance was aided by an
overall improvement in the operating margin and higher other income.
Exhibit 5: Net Profit and growth trend
1,400
30
1,200
20
1,000
10
800
-
600
(10)
400
200
(20)
0
(30)
Net Profit
QOQ growth (%)
Source: Company, Angel Research
July 20, 2016
5
Hindustan Unilever | 1QFY2017 Result Update
Investment rationale
Largest FMCG player with leadership in several categories
HUL has presence across various product categories and has brands in both mass
and premium segments in most of these categories. The company’s products are
available at multiple price points and it is a leader in many of the categories in
which it has presence.
Outlook and valuation
We expect HUL to post a ~8% and ~7% CAGR in its top-line and bottom-line
respectively, over FY2016-18E. At the current market price, the stock is trading at
40.9x its FY2018E earnings. We maintain our Neutral view on the stock.
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, Lakmé, Dove,
Clinic Plus, Sunsilk, Pepsodent, Close Up, Axe, Brooke Bond, Bru, Knorr, Kissan and
Walls, has a vast presence in rural as well as urban Indian markets, and has one
of the largest distribution networks spanning over 6.3mn retail outlets.
July 20, 2016
6
Hindustan Unilever | 1QFY2017 Result Update
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016
FY2017E
FY2018E
Total operating income
27,004
29,234
31,972
33,194
35,252
38,495
% chg
15.2
8.3
9.4
3.8
6.2
9.2
Total Expenditure
22,799
24,488
26,558
27,283
29,047
31,797
Raw Materials
14087
14870
16176
15866
17168
18593
Selling & Administrative Exp
3290
3675
3944
4595
4477
4966
Personnel Expenses
1,413
1,573
1,724
1,742
2,045
2,310
Others Expenses
4,009
4,371
4,715
5,079
5,358
5,928
EBITDA
4,205
4,746
5,414
5,911
6,204
6,698
% chg
20.7
12.8
14.1
9.2
5.0
8.0
(% of Net Sales)
15.6
16.2
16.9
17.8
17.6
17.4
Depreciation& Amortisation
251
296
322
357
377
407
EBIT
3,954
4,450
5,091
5,554
5,828
6,291
% chg
21.7
12.5
14.4
9.1
4.9
8.0
(% of Net Sales)
14.6
15.2
15.9
16.7
16.5
16.3
Interest & other Charges
26
41
18
5
5
5
Other Income
1,138
806
1,246
397
600
600
(% of PBT)
22.5
15.4
19.7
6.7
9.3
8.7
Share in profit of Associates
-
-
-
-
-
-
PBT (reported)
5,066
5,215
6,320
5,947
6,423
6,887
Tax
1,227
1,259
1,944
1,852
1,991
2,135
(% of PBT)
24.2
24.1
30.8
31.2
31.0
31.0
PAT (reported)
3,839
3,956
4,376
4,094
4,432
4,752
Less: Minority interest (MI)
10
10
12
12
12
13
PAT after MI (reported)
3,829
3,946
4,363
4,082
4,420
4,739
Prior Period & Extra. Exp./(Inc.)
459
179
470
(27)
-
-
ADJ. PAT
3,370
3,767
3,893
4,109
4,420
4,739
% chg
24.7
11.8
3.3
5.6
7.6
7.2
(% of Net Sales)
12.5
12.9
12.2
12.4
12.5
12.3
Basic & diluted EPS (`)
15.6
17.4
18.0
19.0
20.4
21.9
Adjusted EPS EPS (`)
15.6
17.4
18.0
19.0
20.4
21.9
% chg
24.7
11.8
3.3
5.6
7.6
7.2
July 20, 2016
7
Hindustan Unilever | 1QFY2017 Result Update
Consolidated Balance Sheet
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016E FY2017E FY2018E
SOURCES OF FUNDS
Equity Share Capital
216
216
216
216
216
216
Reserves& Surplus
2,649
3,321
3,805
4,452
5,159
5,918
Shareholders Funds
2,865
3,537
4,022
4,669
5,376
6,134
Minority Interest
21
22
25
25
25
25
Total Loans
25
46
43
255
255
255
Deferred Tax Liability
218
241
278
278
278
278
Total Liabilities
3,128
3,846
4,367
5,226
5,940
6,698
APPLICATION OF FUNDS
Gross Block
4,418
5,079
5,412
5,712
6,062
6,462
Less: Acc. Depreciation
1,986
2,333
2,591
2,948
3,325
3,732
Net Block
2,431
2,746
2,821
2,764
2,737
2,730
Capital Work-in-Progress
222
373
516
516
516
516
Investments
2,252
2,838
3,025
3,025
3,025
3,025
Current Assets
6,977
7,617
7,869
8,689
9,878
11,459
Inventories
2,706
2,940
2,849
2,910
3,091
3,375
Sundry Debtors
997
1,017
1,011
1,091
1,159
1,266
Cash
1,901
2,516
2,689
3,028
3,690
4,316
Loans & Advances
655
598
731
996
1,234
1,540
Other Assets
718
547
588
664
705
962
Current liabilities
9,181
10,149
10,341
10,245
10,694
11,509
Net Current Assets
(2,204)
(2,531)
(2,472)
(1,556)
(816)
(51)
Deferred Tax Asset
426
421
477
477
477
477
Mis. Exp. not written off
-
-
-
-
-
-
Total Assets
3,128
3,846
4,367
5,226
5,940
6,698
July 20, 2016
8
Hindustan Unilever | 1QFY2017 Result Update
Consolidated Cashflow Statement
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016E FY2017E FY2018E
Profit before tax
4,460
4,980
5,640
5,947
6,423
6,887
Depreciation
251
296
322
357
377
407
Change in Working Capital
429
429
405
(342)
(603)
(107)
Interest / Dividend (Net)
(140)
(290)
(258)
(225)
5
5
Direct taxes paid
(1,074)
(1,384)
(2,030)
(1,852)
(1,991)
(2,135)
Others
(323)
(212)
(957)
(22)
488
(44)
Cash Flow from Operations
3,605
3,818
3,124
3,863
4,699
5,012
(Inc.)/ Dec. in Fixed Assets
(7)
111
493
(300)
(350)
(400)
(Inc.)/ Dec. in Investments
70
(586)
(187)
-
-
-
Cash Flow from Investing
63
(475)
306
(300)
(350)
(400)
Issue of Equity
7
2
2
-
-
-
Inc./(Dec.) in loans
25
(15)
(3)
212
-
-
Dividend Paid (Incl. Tax)
(4,000)
(2,811)
(3,245)
(3,452)
(3,713)
(3,981)
Interest / Dividend (Net)
212
98
(9)
15
26
(5)
Cash Flow from Financing
(3,764)
(2,728)
(3,256)
(3,224)
(3,687)
(3,986)
Inc./(Dec.) in Cash
(96)
615
173
338
662
626
Opening Cash balances
1,996
1,901
2,516
2,689
3,028
3,690
Closing Cash balances
1,901
2,516
2,689
3,028
3,690
4,316
July 20, 2016
9
Hindustan Unilever | 1QFY2017 Result Update
Key Ratios
Y/E March
FY2013
FY2014
FY2015
FY2016E FY2017E FY2018E
Valuation Ratio (x)
P/E (on FDEPS)
57.5
51.4
49.8
47.1
43.8
40.9
P/CEPS
47.3
45.6
41.2
43.5
40.3
37.5
P/BV
67.6
54.8
48.2
41.5
36.0
31.6
Dividend yield (%)
2.1
1.5
1.7
1.8
1.9
2.1
EV/Sales
7.0
6.4
5.9
5.7
5.3
4.8
EV/EBITDA
45.1
39.7
34.7
31.8
30.2
27.9
EV / Total Assets
15.4
13.5
12.8
12.1
11.3
10.2
Per Share Data (`)
EPS (Basic)
15.6
17.4
18.0
19.0
20.4
21.9
EPS (fully diluted)
15.6
17.4
18.0
19.0
20.4
21.9
Cash EPS
18.9
19.6
21.7
20.6
22.2
23.8
DPS
18.5
13.0
15.0
16.0
17.2
18.4
Book Value
13.2
16.3
18.6
21.6
24.8
28.3
Returns (%)
ROCE
136.8
124.2
125.3
112.8
103.5
98.5
ROE
133.7
111.5
108.5
87.4
82.2
77.3
Turnover ratios (x)
Asset Turnover (Gross Block)
6.1
5.8
5.9
5.8
5.8
6.0
Inventory / Sales (days)
37
37
33
32
32
32
Receivables (days)
13
13
12
12
12
12
Payables (days)
58
62
58
58
57
57
WC cycle (ex-cash) (days)
(8)
(12)
(14)
(14)
(13)
(13)
July 20, 2016
10
Hindustan Unilever | 1QFY2017 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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Disclosure of Interest Statement
HUL
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
July 20, 2016
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