Hindustan Unilever
BSE SENSEX
51,937
S&P CNX
15,583
31 May 2021
Annual Report Update | Sector: Consumer
CMP: INR2,341
TP: INR2,780 (+19%)
Treading on the path to sustainable growth
Buy
We present some key points from Hindustan Unilever (HUVR)’s FY21 Annual Report:
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
HUVR IN
2,350
5501.2 / 75.8
2504 / 2001
-7/-8/-46
5618
38.1
Financials Snapshot (INR b)
Y/E Mar
2021 2022E 2023E
Sales
Sales Gr. (%)
EBITDA
Margins (%)
Adj. PAT
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh.(INR)
Ratios
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
67.3
11.6
48.2
1.7
59.2
11.6
41.6
1.7
48.3
11.5
35.3
2.0
29.5
39.0
116.3
19.6
26.6
98.6
23.9
32.1
98.1
460
18.6
113
24.6
82
34.8
11.5
201.8
504
9.5
131
26.0
93
39.5
13.6
202.4
577
14.6
154
26.7
114
48.4
22.5
203.3
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-21 Dec-20 Mar-20
61.9
10.7
15.0
12.5
61.9
10.7
14.9
12.5
67.2
6.7
12.1
14.1
FII Includes depository receipts
Gaining market share:
HUVR now has 14 brands with over INR10b in annual
sales (v/s 12 brands last year). In FY21, it gained market share in 84% of its
portfolio and launched more than 150 SKUs.
Rapid technology adoption:
A significant leap has been observed in technology
adoption among small retailers, which are convinced that this is, indeed, the
need of the hour. HUVR’s eB2B app, ‘Shikhar’, has enabled its retailer partners
to place contactless orders conveniently, with over 500k retailers ordering
through the app. We reckon that while this accounts for ~20% of HUVR’s direct
reach and ~6% of the total reach, the proportion of sales would be higher.
HUVR is looking to scale up the app, while continuing to work at the backend to
build next-day delivery systems. The company has partnered with the State
Bank of India to resolve the liquidity issues of small retailers, thus helping build
stronger channel relationships. HUVR continues to empower Shakti
entrepreneurs and now has a network of nearly 136k spanning 18
states/territories in India ensuring strong growth in a volatile supply chain
environment.
Strengthening e-commerce presence:
Online sales have emerged as a key
growth channel, and this growth is likely to sustain post the pandemic as well. As
a result, the company is focusing on replicating the concept of the ‘perfect store’,
successfully applied to its brick-and-mortar stores, in its e-commerce sales as
well. The move to build the perfect online store and drive everyday great
execution has ensured the best-in-class online availability and discoverability of
its products. E-Commerce-focused innovations include smart packaging solutions
and the right pack price architecture to suit last-mile logistics.
Boosting GSKCH sales:
FY21 marked the first year of its merger with the
GlaxoSmithKline Consumer Healthcare Limited (GSKCH) business in India. With
low penetration levels, the Health Food Drinks (HFD) category offers huge
headroom for growth. The Annual Report highlights HUVR has clear strategies
in place to drive growth, such as (a) improving accessibility and reach, (b)
landing impactful innovations, (c) increasing profitability through synergies,
and (d) investing in brands. To make Horlicks and Boost more accessible to
consumers, HUVR introduced new pouch packs and INR2 sachets in FY21.
Significant expansion was also seen in Boost’s distribution across India.
Extending premiumization to segments beyond detergents:
Notably, from a
premiumization perspective, rapidly increasing sales of dishwashers in India (as
indicated in the Annual Report) could be a game-changer, driving the shift from
a) powder to liquid dishwashing products, and b) beyond that to Vim’s
premium ‘Matic’ range of products. This, we note, is in addition to the ongoing
spurt and premiumization in the even larger Personal Wash category. HUVR
has seen significant premiumization in Detergents in the last 6–7 years, which
may potentially be observed in the Dishwashing and Personal Wash segments
as well.
Krishnan Sambamoorthy – Research Analyst
(Krishnan.Sambamoorthy@MotilalOswal.com)
Research Analyst:
Dhairya Dhruv
(Dhairya.Dhruv@MotilalOswal.com)
/
Kaiwan Jal Olia
(kaiwan.o@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.