Hindustan Unilever (HUL)’s performance for 1QFY2017 was slightly below
consensus expectations. For the quarter, the company’s top-line grew by 3.6% yoy
to `8,128cr while the reported PAT grew ~10% yoy to `1,174cr.
Key highlights: 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 modest
growth of ~5% yoy each.
The company posted a weak operating performance for the quarter with the
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%.
Outlook and valuation: We expect HUL to post a ~8% and ~7% CAGR in its topline
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.

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