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TYBFM, ROLL NO. 7
EMAIL ID :[email protected]
DATE : 1ST
NOVEMBER 2020
EQUITY RESEARCH REPORT
ANALYSIS BY
ADITI DILIP BHANSHE
TYBFM, ROLL NO. 7
EMAIL ID : [email protected]
HII
HINDUSTAN UNILEVER LIMITED (also referred as HUL), is India’s largest consumer goods company having a presence over 80 years in India. It is a subsidiary of British- Dutch Company UNILEVER. The portfolio of this company consists of leading brands like Lakme, Lux, Pureit, Axe, Kwality Walls, Surf Excel, Brooke Bond, Lipton, Etc. Also the Horlicks and boost were added after the merger of business of GlaxoSmithKline Consumer Healthcare Limited (GSK CH). Back to 90’s, at the time of its formation when Unilever wanted to set up its first’s subsidiary in India they joined hands with The Hindustan Vanaspati Manufacturing Company (1931), Lever Brothers India limited (1933) and United Traders Limited (1935). Later on, the company became the first one to get listed in Indian markets among foreign subsidiaries in 1956 by offering 10% of Equity. Till date, HUL has acquired 44+ brands across 14 distinct categories having 8 Million+ outlets across India.
HINDUSTAN UNILEVER LIMITED
HOW DID THE BIG DADDY SURVIVED THIS PANDEMIC
AND MAINTAINS TO LEAD THE INDUSTRY?
Despite of COVID-19 outbreak, the company manages to deliver competitive and profitable
growth during the FY’20. Though the impact of the on the on going pandemic has more on
other sectors compared to FMCG sector, overcoming the complications in the supply lines,
shortfall of manpower and disruptions in transportation helped to maintain the leading
position in the market.
The FMCG sector stands at 4th position in the Indian Economy, comprising of Personal
product - 18%, Homecare - 11%, Cigarettes and Alcohol - 17%, and Over The Counter(OTC) -
5%.
Around 45-50% of the revenue of the BIG DADDY is earned from the rural consumption. It
produces on a large scale thereby gaining the benefits of economies of large scale. The
company aims to reinvest in the innovation, which help them to be winner in the long run.
COMPANY DETAILS
CMP INR 2071.30
52 WEEK
HIGH / LOW
INR 2614 / INR
1756
BSE CODE 500696
NSE CODE HINDUNILVR
ISIN INE030A01027
MARKET CAP INR 5.11 T
BOOK VALUE INR 199
FACE VALUE INR 1
FINANCIAL
OVERVIEW
FY’19-20
(INR CRS)
NET REVENUE 38,785
EBITDA 9,600
EPS OF INR 1 31.13
DPS OF INR 1 25.00
SHAREHOLDING PATTERN
PROMOTERS 61.90
FIIs 14.54
DIIs 10.82
PUBLIC 12.74
RECOMMENDATION
BUY
TARGET PRICE (INR) 3300 -
3500
All the data including figures, charts and images are taken from company’s Annual report and from company’s Interactive Analysis Tool. SOURCE : www.hul.co.in. and www.screener.com
FINANCIAL OVERVIEW
All the data including figures, charts and images are taken from company’s Annual report and from company’s Interactive Analysis
Tool. SOURCE : www.hul.co.in.
Page 2
.
The company maintains it position to deliver
healthy profits over a period of time. A major
increase in finance costs is seen due to interest on
lease liabilities. During the FY’20, the company’s
depreciation and amortization expense had
increased due depreciation expense beared on the
leased assets. This significant effect is also seen in
ROCE which apparently decreased by 2-3% during
the year.
INR CRORES
Page 3
Inside Story Headline
All the data including figures, charts and images are taken from company’s Annual report and from company’s Interactive Analysis Tool. SOURCE : www.hul.co.in.
It is pretty much evident from the company’s balance
sheet that there has been increase in there other
equity component over a period of time. It is mainly
due to retained earnings. A huge amount of profits
are left after distributing dividends and transfer to
reserves.
The current and non-current liabilities have
increased due to lease liabilities. Other components
of current and non-current liabilities have decreased
or maintained in a particular range. The drastic
increase in non-current assets is driven by the
investments in fixed assets.
On the other hand, though inventories, other
financial assets, and other current assets have
increased in FY’20, the overall decreased in current
assets is seen due to decrease in Trade receivables,
other Investments. The company is seating on excess
cash which is almost 5-6% of the previous year’s cash
balance.
The company has generate around INR 9,473 from the operating segment, before adjustment in working capital changes. As
mentioned earlier, the inventories are increased indicating additional outflow of the cash. The current and non-current assets
have also increased, indicating cash outflow. A negative flow is seen from the investing activities due to huge investments done
by the company. Also the company is providing loans to its subsidiaries. A negative cash flow from Financing activities is seen
due to heavy dividend payout in the FY’20. Also, the principal payment of lease liabilities is paid during the year. The interest on
other remaining lease liabilities. The Net Cash flow for the year stands at INR 3130 against INR 575 from the previous year.
INR CRORES
INR CRORES
SHARE PERFORMANCE Page 3
All the data including figures, charts and images are taken from company’s Annual report and from company’s Interactive Analysis Tool. SOURCE : www.hul.co.in. The technical chart is taken from www.tradingview.com
The overall FMCG sector is growing at the rate of 9-10%, the company tends to grow whereas HUL is growing at 17%. As seen in the stock chart it is in uptrend for a longer duration and expected to maintain the same momentum. It has out performed Sensex and Nifty and will continue its performance. it is more investor friendly stock i.e. it offers high dividend payouts. Recently, it has formed Head and shoulder pattern on the long term chart having 1st and 2nd shoulder formed at INR 2300 and INR 2329 respectively and head at INR 2477. Once it breaks head level then it is expected to have a stronger up-move, thus fulfilling the target price.
FUTURE PROSPECTS AND FINAL CALL
Being major revenue earned from beauty personal care segment, the impact of the current outbreak is yet to see. However , the other segments continue to deliver strong numbers. The nutrition, health and hygiene segment contributed around 80% of the revenue in the recent quarter results. Apart from this, the company is engaged into heavy merger and acquisition activities to have diversified portfolio of brands. In true sense, the company maintains to lead the industry and gain exposure to other segments too. The overall industry’s exposure towards the E-commerce is less than 1%. It is expected to explore and gain benefit from this segment. The advancements in technological fields like Artificial intelligence (AI), Internet of Things (IoT) and robotics are reshaping the lives of customers associated with the brands. The company is using these parameters to build the value for customers. Considering Indian population matrix, the increasing population is backed by increasing consumptions thereby creating demand for FMCG products. As rightly said by the company about its products being used at every 9 out 10 times in the day to day activities, ensuring the overall high consumption. The various government schemes and policies introduced drives the consumption. New reforms like Goods and Services TAX (GST) will also benefit to bring the unorganized business in the country under the tax slab and provide level for playing field with Organized sector. The 51% FDI in multi-brand and 100% in single-brand retail are the major drivers of consumption segment.
Page 4
Disclosure:
The author, ADITI DILIP BHANSHE of the above conducted research hereby declares that the report reflects the true
state of affairs of the company. Also no part of compensation is involved directly or indirectly. However, the author has
direct and indirect has ownership stake in the company. The research report does not guarantee the returns arising from
the above mentioned company. The author is not responsible for any profits, loss or liabilities earned/incurred from this
research report,. The target may or may not fulfill considering the macro-economic and political conditions. The returns
calculation only considers price appreciation effect, any benefits like dividends earned during the holding period are
excluded from the calculations.
The Author is not a SEBI registered analyst, however all the research conducted is based on the author’s knowledge in
the particular arena. However, It is advisable to consult your financial adviser before taking any position based on this
report.
