2QFY2017 Result Update | FMCG
November 2, 2016
Hindustan Unilever
NEUTRAL
CMP
`835
Performance Highlights
Target Price
-
Quarterly Data
Investment Period
-
(` cr)
2QFY17
2QFY16
% yoy
1QFY17
% qoq
Revenue
7,843
7,731
1.4
8,128
(3.5)
Stock Info
EBITDA
1,403
1,315
6.7
1,591
(11.8)
Sector
FMCG
Market Cap (` cr)
180,771
Margin (%)
17.9
17.0
89bp
19.6
(169bp)
Net Debt (` cr)
(5,520)
Reported PAT
1,096
982
11.5
1,174
(6.7)
Beta
0.6
Source: Company, Angel Research
52 Week High / Low
954 / 765
Hindustan Unilever (HUL)’s performance for 2QFY2017 was below expectations
Avg. Daily Volume
73,419
on the top-line front; however, the bottom-line front performed well. For the
Face Value (`)
1
quarter, the company’s top-line grew by 1.4% yoy to `7,843cr, while the reported
BSE Sensex
27,877
PAT grew by ~12% yoy to `1,096cr.
Nifty
8,626
Reuters Code
HLL.BO
Key highlights: For 2QFY2017, HUL’s overall top-line rose by 1.4% yoy to
Bloomberg Code
[email protected]
`7,843cr on the back of weak volume growth across the segment. The soaps &
detergents division posted a 3.2% yoy growth to `2,777cr, which was driven by
the healthy volume growth in surf. In home care, the growth continued to be
Shareholding Pattern (%)
driven by the premium segment. The vim liquid performed well, driven by
Promoters
67.2
sustained market development. In the personal products segment, HUL grew flat
MF / Banks / Indian Fls
5.0
yoy due to a challenging market environment. The beverages and packaged
FII / NRIs / OCBs
14.0
foods reported a modest growth of ~8% and ~2% yoy, respectively.
Indian Public / Others
13.8
The company posted a weak operating performance for the quarter with the
operating profit reporting a growth of 6.7% yoy. Further, the operating profit margin
Abs. (%)
3m
1yr
3yr
increased by 89bp yoy to 17.9% due to lower material & employee cost. On the
Sensex
(0.3)
4.8
32.8
bottom-line front, the company reported a net profit growth of ~12%.
HUL
(8.8)
4.8
37.4
Outlook and valuation: We expect HUL to post ~7% and ~9% CAGR in its
top-line and bottom-line, respectively, over FY2016-18E. At the current market
3-year price chart
1200
price, the stock is trading at 37.3x its FY2018E earnings. We maintain our
1000
Neutral view on the stock.
800
Key financials (Consolidated)
600
Y/E March (` cr)
FY2015
FY2016
FY2017E
FY2018E
400
Net sales
31,972
33,194
35,252
38,495
200
% chg
9.4
3.8
6.2
9.2
0
Net profit
3,893
4,109
4,469
4,845
% chg
3.3
5.6
8.8
8.4
EBITDA margin (%)
16.9
17.8
17.8
17.8
Source: Company, Angel Research
EPS (`)
18.0
19.0
20.6
22.4
P/E (x)
46.4
44.0
40.4
37.3
P/BV (x)
44.9
45.5
38.6
33.2
RoE (%)
108.5
102.8
95.6
88.9
Amarjeet S Maurya
RoCE (%)
125.3
131.4
119.6
112.9
022-39357800 Ext: 6831
EV/Sales (x)
5.5
5.3
5.0
4.5
[email protected]
EV/EBITDA (x)
32.3
29.6
27.9
25.5
Source: Company, Angel Research; Note: CMP as of November 1, 2016
Please refer to important disclosures at the end of this report
1
Hindustan Unilever | 2QFY2017 Result Update
Exhibit 1: Standalone quarterly performance
Y/E March (` cr)
2QFY17
2QFY16
% yoy
1QFY17
% qoq
1HFY17
1HFY16
% chg
Net Sales
7,843
7,731
1.4
8,128
(3.5)
15,971
15,576
2.5
Consumption of RM
3,962
3,897
1.7
3,955
0.2
7,918
7,794
1.6
(% of Sales)
50.5
50.4
48.7
49.6
50.0
Staff Costs
396
375
5.5
427
(7.2)
823
733
12.2
(% of Sales)
5.0
4.9
5.2
5.2
4.7
Advertising
851
921
(7.6)
880
(3.2)
1,731
1,814
(4.6)
(% of Sales)
10.9
11.9
10.8
10.8
11.6
Other Expenses
1,230
1,224
0.5
1,275
(3.5)
2,459
2,388
3.0
(% of Sales)
15.7
15.8
15.7
15.4
15.3
Total Expenditure
6,439
6,417
0.4
6,537
(1.5)
12,930
12,730
1.6
Operating Profit
1,403
1,315
6.7
1,591
(11.8)
3,041
2,846
6.8
OPM
17.9
17.0
19.6
19.0
18.3
Interest
5
5
9.1
5.95
(17.0)
11
9
18.4
Depreciation
95
76
24.1
93
1.3
188
151
24.3
Other Income
272
204
33.6
223
22.3
449
317
41.6
PBT (excl. Ext Items)
1,576
1,438
9.6
1,715
(8.1)
3,291
3,003
9.6
Ext (Income)/Expense
-
-
-
-
-
PBT (incl. Ext Items)
1,576
1,438
9.6
1,715
(8.1)
3,291
3,003
9.6
(% of Sales)
20.1
18.6
21.1
20.6
19.3
Provision for Taxation
481
456
541
1,022
952
7.3
(% of PBT)
30.5
31.7
31.6
31
32
Reported PAT
1,096
982
11.5
1,174
(6.7)
2,270
2,051
10.6
PATM
14.0
12.7
14.4
14.2
13.2
Equity shares (cr)
216
216
216
216
216
FDEPS (`)
5.1
4.5
11.5
5.4
(6.7)
10.5
9.5
10.6
Source: Company, Angel Research
November 2, 2016
2
Hindustan Unilever | 2QFY2017 Result Update
Exhibit 2: Segmental Performance
2QFY2017
2QFY2016
% chg
1QFY2017
% chg 1HFY17
1HFY16
% chg
Income
Soaps & Detergents
2,777
2,691
3.2
2,876
(3.4)
5,653
7,603
(25.6)
Personal Products
4,028
4,041
(0.3)
4,222
(4.6)
8,250
4,302
91.7
Beverages
1,169
1,079
8.4
1,215
(3.8)
2,384
1,736
37.4
Packaged Foods
278
271
2.4
272
2.1
550
995
(44.7)
Others
218
257
(15.2)
204
7.0
422
665
(36.5)
Total Gross Income
8,470
8,339
8,789
17,259
15,300
PBIT segment -wise bifurcation
Soaps & Detergents
280
225
24.7
356
(21.3)
636
1,043
(39.0)
Personal Products
923
891
3.6
1,021
(9.7)
1,944
1,119
73.7
Beverages
173
147
17.5
192
(10.1)
365
292
24.9
Packaged Foods
14
16
(16.2)
17
(19.2)
31
79
(61.2)
Others
9
4
112.1
(9)
(0)
(4)
(91.5)
Total PBIT
1,398
1,283
1,577
2,975
2,529
Less: Interest Exp
5
5
6
11
13
Less: Other Unallocable Exp
183
160
144
327
375
PBT
1,576
1,438
1,715
3,291
2,891
PBIT Margin (%)
Soaps & Detergents
10.1
8.3
12.4
11.2
13.7
Personal Products
22.9
22.0
24.2
23.6
26.0
Beverages
14.8
13.6
15.8
15.3
16.8
Packaged Foods
4.9
6.0
6.2
5.6
7.9
Others
4.2
1.7
(4.6)
(0.1)
(0.6)
Source: Company, Angel Research
Overall top-line growth flattish
For 2QFY2017, HUL’s overall top-line rose by 1.4% yoy to `7,843cr on the back
of weak volume growth across the segment. The soaps & detergents division
posted a 3.2% yoy growth to `2,777cr, which was driven by healthy volume
growth in surf. In home care, the growth continued to be driven by the premium
segment. The vim liquid performed well, driven by sustained market development.
In the personal products segment, HUL grew flat yoy due to a challenging market
environment. The beverages and packaged foods reported a modest growth of
~8% and ~2% yoy, respectively.
November 2, 2016
3
Hindustan Unilever | 2QFY2017 Result Update
Exhibit 3: Top-line growth trend
10
8,400
8,200
8
8,000
6
7,800
4
7,600
7,400
2
7,200
-
7,000
(2)
6,800
(4)
6,600
6,400
(6)
Net Sales
QoQ growth (%)
Source: Company, Angel Research
Operating margin improved due to lower raw material cost
and employee cost
The company reported a 6.7% yoy growth in its operating profit for the quarter,
while the operating profit margin improved by 89bp yoy to 17.9% due to lower
material and employee cost.
Exhibit 4: Operating profit and margin trend
1,800
25
1,600
1,400
20
1,200
15
1,000
800
10
600
400
5
200
0
0
Operating Profit
Margin (%)
Source: Company, Angel Research
November 2, 2016
4
Hindustan Unilever | 2QFY2017 Result Update
Reported PAT grew ~12% yoy
Despite the low top-line growth, the company has reported ~12% growth on the
back of overall improvement in the operating margin, higher other income and
lower taxes.
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
November 2, 2016
5
Hindustan Unilever | 2QFY2017 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.
Outlook and valuation
We expect HUL to post ~7% and ~9% CAGR in its top-line and bottom-line,
respectively, over FY2016-18E. At the current market price, the stock is trading at
37.3x 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.
November 2, 2016
6
Hindustan Unilever | 2QFY2017 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
28,977
31,643
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
5,288
5,774
EBITDA
4,205
4,746
5,414
5,911
6,275
6,852
% chg
20.7
12.8
14.1
9.2
6.2
9.2
(% of Net Sales)
15.6
16.2
16.9
17.8
17.8
17.8
Depreciation& Amortisation
251
296
322
357
377
407
EBIT
3,954
4,450
5,091
5,554
5,898
6,445
% chg
21.7
12.5
14.4
9.1
6.2
9.3
(% of Net Sales)
14.6
15.2
15.9
16.7
16.7
16.7
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
9.2
8.5
Share in profit of Associates
-
-
-
-
-
-
PBT (reported)
5,066
5,215
6,320
5,947
6,494
7,041
Tax
1,227
1,259
1,944
1,852
2,013
2,183
(% of PBT)
24.2
24.1
30.8
31.2
31.0
31.0
PAT (reported)
3,839
3,956
4,376
4,094
4,481
4,858
Less: Minority interest (MI)
10
10
12
12
12
13
PAT after MI (reported)
3,829
3,946
4,363
4,082
4,469
4,845
Prior Period & Extra. Exp./(Inc.)
459
179
470
(27)
-
-
ADJ. PAT
3,370
3,767
3,893
4,109
4,469
4,845
% chg
24.7
11.8
3.3
5.6
8.8
8.4
(% of Net Sales)
12.5
12.9
12.2
12.4
12.7
12.6
Basic & diluted EPS (`)
15.6
17.4
18.0
19.0
20.6
22.4
Adjusted EPS EPS (`)
15.6
17.4
18.0
19.0
20.6
22.4
% chg
24.7
11.8
3.3
5.6
8.8
8.4
November 2, 2016
7
Hindustan Unilever | 2QFY2017 Result Update
Consolidated Balance Sheet
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016
FY2017E FY2018E
SOURCES OF FUNDS
Equity Share Capital
216
216
216
216
216
216
Reserves& Surplus
2,649
3,321
3,805
3,755
4,460
5,235
Shareholders Funds
2,865
3,537
4,022
3,972
4,676
5,451
Minority Interest
21
22
25
25
25
25
Total Loans
25
46
43
255
255
255
Deferred Tax Liability
218
241
278
285
285
285
Total Liabilities
3,128
3,846
4,367
4,536
5,241
6,016
APPLICATION OF FUNDS
Gross Block
4,418
5,079
5,412
6,128
6,062
6,462
Less: Acc. Depreciation
1,986
2,333
2,591
2,827
3,204
3,611
Net Block
2,431
2,746
2,821
3,301
2,858
2,851
Capital Work-in-Progress
222
373
516
427
427
427
Investments
2,252
2,838
3,025
2,747
2,747
2,747
Current Assets
6,977
7,617
7,869
8,456
9,455
10,801
Inventories
2,706
2,940
2,849
2,752
2,897
3,164
Sundry Debtors
997
1,017
1,011
1,269
1,352
1,477
Cash
1,901
2,516
2,689
3,028
3,267
3,658
Loans & Advances
655
598
731
771
1,234
1,540
Other Assets
718
547
588
636
705
962
Current liabilities
9,181
10,149
10,341
10,913
10,765
11,329
Net Current Assets
(2,204)
(2,531)
(2,472)
(2,457)
(1,310)
(528)
Deferred Tax Asset
426
421
477
518
518
518
Mis. Exp. not written off
-
-
-
-
-
-
Total Assets
3,128
3,846
4,367
4,536
5,241
6,016
November 2, 2016
8
Hindustan Unilever | 2QFY2017 Result Update
Consolidated Cashflow Statement
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016
FY2017E FY2018E
Profit before tax
4,460
4,980
5,640
5,985
6,494
7,041
Depreciation
251
296
322
357
377
407
Change in Working Capital
429
429
405
(342)
(108)
(1,094)
Interest / Dividend (Net)
(140)
(290)
(258)
(225)
(278)
5
Direct taxes paid
(1,074)
(1,384)
(2,030)
(1,766)
(2,013)
(2,183)
Others
(323)
(212)
(957)
116
(710)
727
Cash Flow from Operations
3,605
3,818
3,124
4,125
3,761
4,902
(Inc.)/ Dec. in Fixed Assets
(7)
111
493
(546)
(350)
(400)
(Inc.)/ Dec. in Investments
70
(586)
(187)
278
-
-
Cash Flow from Investing
63
(475)
306
(268)
(350)
(400)
Issue of Equity
7
2
2
0
-
-
Inc./(Dec.) in loans
25
(15)
(3)
212
-
-
Dividend Paid (Incl. Tax)
(4,000)
(2,811)
(3,245)
(3,452)
(3,754)
(4,070)
Interest / Dividend (Net)
212
98
(9)
(279)
582
(41)
Cash Flow from Financing
(3,764)
(2,728)
(3,256)
(3,519)
(3,172)
(4,111)
Inc./(Dec.) in Cash
(96)
615
173
338
239
392
Opening Cash balances
1,996
1,901
2,516
2,689
3,028
3,267
Closing Cash balances
1,901
2,516
2,689
3,028
3,267
3,658
November 2, 2016
9
Hindustan Unilever | 2QFY2017 Result Update
Key Ratios
Y/E March
FY2013
FY2014
FY2015
FY2016
FY2017E FY2018E
Valuation Ratio (x)
P/E (on FDEPS)
53.6
48.0
46.4
44.0
40.4
37.3
P/CEPS
44.2
42.5
38.5
40.6
37.2
34.3
P/BV
63.1
51.1
44.9
45.5
38.6
33.2
Dividend yield (%)
2.2
1.6
1.8
1.9
2.1
2.3
EV/Sales
6.5
6.0
5.5
5.3
5.0
4.5
EV/EBITDA
42.0
37.0
32.3
29.6
27.9
25.5
EV / Total Assets
14.3
12.5
11.9
11.3
10.9
10.1
Per Share Data (`)
EPS (Basic)
15.6
17.4
18.0
19.0
20.6
22.4
EPS (fully diluted)
15.6
17.4
18.0
19.0
20.6
22.4
Cash EPS
18.9
19.6
21.7
20.6
22.4
24.3
DPS
18.5
13.0
15.0
15.9
17.3
18.8
Book Value
13.2
16.3
18.6
18.4
21.6
25.2
Returns (%)
ROCE
136.8
124.2
125.3
131.4
119.6
112.9
ROE
133.7
111.5
108.5
102.8
95.6
88.9
Turnover ratios (x)
Asset Turnover (Gross Block)
6.1
5.8
5.9
5.4
5.8
6.0
Inventory / Sales (days)
37
37
33
30
30
30
Receivables (days)
13
13
12
14
14
14
Payables (days)
58
62
58
59
57
56
WC cycle (ex-cash) (days)
(8)
(12)
(14)
(15)
(13)
(12)
November 2, 2016
10
Hindustan Unilever | 2QFY2017 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
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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)
November 2, 2016
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