Hindustan Unilever Ltd (Q2 FY13)

India Infoline News Service | Mumbai |

Hindustan Unilever Ltd (Q2 FY13)

CMP Rs552, Target Rs544, Downside 1.4%

  • Q2 revenues were below our expectations at ~Rs61.6bn, up by 11.6% yoy led by ~18% yoy growth in HPC segment. Domestic FMCG business witnessed a lower underlying volume growth of 7% against 9% in Q1 FY13 
  • Soaps and Detergents segment witnessed 190bps expansion in EBIT margins at 14.3% on a low base. Personal products segment margins, however, contracted by 130bps to 24.2%
  • Operating margins remained flat at 13.3  % due to sharp rise in advertising cost. Adjusted net profit registered 17% yoy increase at Rs8.1bn driven by higher other income
  • We maintain Market Performer rating with a revised 9-mth target price of Rs544
Result table (Standalone)
(Rs m) Q2 FY13 Q2 FY12 % yoy Q1 FY13 % qoq
Net sales 61,554 55,160 11.6 62,502 (1.5)
Material cost (32,695) (30,088) 8.7 (33,677) (2.9)
Personnel cost (3,305) (2,873) 15.0 (3,329) (0.7)
Advertising cost (7,690) (6,514) 18.1 (8,196) (6.2)
Other overheads (9,652) (8,360) 15.4 (8,921) 8.2
Operating profit 8,213 7,326 12.1 8,378 (2.0)
OPM (%) 13.3 13.3 6 bps 13.4 -6 bps
Depreciation (577) (571) 1.0 (576) 0.1
Interest (63) (5) - (53) 19.9
Other income 3,042 1,752 73.6 3,472 (12.4)
PBT 10,615 8,501 24.9 11,222 (5.4)
Tax (2,561) (2,057) 24.5 (3,957) (35.3)
Effective tax rate (%) 24.1 24.2 - 35.3 -
Adjusted PAT 8,053 6,445 25.0 7,265 10.9
Adj. PAT margin (%) 13.1 11.7 140 bps 11.6 146 bps
Extra ordinary items 16 444 (96.4) 6,047 (99.7)
Reported PAT 8,069 6,889 17.1 13,312 (39.4)
Ann. EPS (Rs) 14.9 11.9 24.9 13.4 10.8
Source: Company, India Infoline Research

Revenues below expectations

HUL Q2 FY13 revenues were below our expectations (of Rs63bn) at Rs61.6bn – up by mere 11.6% yoy due to slower 16% yoy growth in domestic FMCG business. Underlying volume growth for the quarter was lower at 7% compared to 9% in Q1 FY13, impacted by lower sales to CSD (contributes ~6% to revenues).


Revenue break-up
(Rs m) Q2 FY13 Q2 FY12 Growth Q1 FY13 Growth
  (3) (3) % yoy (3) % qoq
Domestic FMCG - HPC 48,131 40,927 17.6 49,256 (2.3)
Domestic FMCG - Foods 10,626 9,735 9.2 10,700 (0.7)
a) Domestic FMCG - Total 58,758 50,661 16.0 59,956 (2.0)
b) Others 2,796 4,499 (37.8) 2,545 9.9
Total (a+b) 61,554 55,160 11.6 62,502 (1.5)
Source: Company, India Infoline Research

The core Soaps and Detergents segment; contributing ~50% to revenues and ~46% to EBIT registered 22.3% yoy growth at Rs31.8bn (double digit volume growth in Surf and Rin). Personal products segment recorded 12.1% yoy growth in revenues at Rs17.4bn primarily led by strong growth in skin care segment (double digit growth in brands - Ponds, Vaseline, Dove). HUL has increased Fair and Lovely sachet prices by Re1 to Rs8 during the quarter. The growth could have been better but for the slower growth in shampoo segment due to intense competition. Beverages segment registered modest 10% yoy growth in revenues led by premium tea and coffee (slower growth in mass segment tea brands). Revenues from the packaged foods segment witnessed 10.2% yoy increase at Rs3.7bn driven by Kissan and Kwality Walls (double digit growth in Knorr on a low base – market still witnessing slowdown).


Segment-wise revenue trend
BSE 1,316.55 1.60 (0.12%)
NSE 1,315.05 0.40 (0.03%)

***Note: This is a NSE Chart

 

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Segments FY11 FY12 FY13
(Rs m) Q1 Q2 Q3 Q4