Wednesday, July 22, 2020

HUL Result and Sector Analysis

HUL Result and Sector Analysis

Sector Analysis:

India’s personal care industry is composed of hair care, bath products, skincare and cosmetics, and oral care. The sector is driven by rising income, rapid urbanization, and celebrity promotions. This industry accounts for 22% of the country’s fast-moving consumer goods (FMCG), which is the term for Consumer Packaged Goods in India. Worldwide This Industry has grown widely since not 2-3 decades but Some of the companies have a long profit-making history for 2 centuries. Today Companies like Johnson & Johnson as well as P&G are among world TOP 30 companies with a profit of around 1 lakh cr. As Gdp/capital of our country rises we may see growth in premium products. Now E-Commerce is playing a big role in this industry. Y-O-Y FMCG product contribution is increasing in E-Com. Out of 10 cr Indian shoppers, 3 cr are FMCG shoppers. Rising upper Middle class of 54 cr in 2022 from currently just 38 cr will be a key trigger for high growth. Indian Upper Middle class would be more than the Population of North America. 

The majority of the companies are for a long time and hence today they are able to distribute more than 50% of profits in Dividends. Indian companies are also growing internationally showing high growth. It can have 1-2 companies from this industry in the portfolio. 

Total MCap by Personal Care Products is around 7.5 Lakh Cr and out of this HUL, Dabur, Godrejcon, Marico are responsible for 80% Mcap or even Sales & profits. 

Hidustan Unilever Ltd.

If You have heard the name of LifeBuoy, Lux, SurfExcel, Rin, Wheel, VIM, Fair&Lovely, Lakme, Ponds, Dove, ClininPlus, Pepsodent, Brooke Bond, Bru, Pure than this all are brands given by HUL. & Now Horlicks and Boost have added in the list. The leader in the Indian personal care products market for 80 years with a market share of around 50% among listed entities. Vast leadership was maintained by Hul even after 70 years of Independence. They were having revenue and Profit of 10000 cr & 1300 cr during 2001 & today able to generate revenue and Profit of 40000 cr & 6700 cr respectively. Growth of around 7% CAGR for 2 decades. HUL was in Top Weightage of NIfty during 1995 today many other companies with the capability of 20% CAGR since the last 2 decades have overtaken the place. The last decade was good and HUL is still able to maintain its place in top 10, consistent performance since long history otherwise 80% TOP companies of 1990 have been replaced today by others. Investors have gained a consistent 15% CAGR return since the last 25 years along with the majority of profit from Dividend as HUL distributes 75% of the profits in Dividends. Almost Debt free company. 

The spread of COVID 19 impacted the business from mid-March, which culminated into scaling down of operations post the national lockdown. Domestic Consumer Growth declined by 9% with a decline of 7% in Underlying Volume Growth. currently operating at about 70% of normative levels. Demand patterns are changing, and we are likely to see an upswing in categories like health, hygiene, and nutrition. Hence Q1 revenue & Profit have grown by 4% and 6% respectively which were as expected as impacted due to lock down. Excluding GSK growth is -7%. Real EPS has grown by -2% despite profit growth of 6% due to increase in equity by 9%. No doubt a wealth creator company. The merger of Glaxo Smith Kline Consumer has been approved which will help Hul reach faster towards 50000 cr landmark revenue. Such in-organic growth could be seen if we have such debt-free companies with good reserves. Many people in this group are holding this company from 500 during 2014 and many are holding since 800. We have been expecting a multi-year rally. Double-digit growth is seen in homecare and Tea business. For the new buyers, we can again add near 1700 as

ROI as per current price would be just 1.5% which is not attractive. Do not buy during the rally. A SIP stock as a wealth creator. 67% UK Promoter Holding while 20% with FII, MF, and Insurance Companies. 

Net profit of India’s largest consumer goods maker rose 7.2% year-on-year to Rs 1,881 crore in the quarter ended June, according to an exchange filing. That compares with the Rs 1,722-crore consensus estimate of analysts tracked by Bloomberg.

Revenue rose 4.4% over last year to Rs 10,560 crore—higher than the estimated 9,880 crore.

Operating profit fell 0.1% to Rs 2,644 crore.

Margin narrowed to 25% from 26.2% earlier.

Segment-Wise Performance

Home Care YoY (2.1%)
Personal care (12%)
Foods & Refreshments 51.7%
Others 55.5%

Dividend declared INR 9.5 per share

According to Sanjiv Mehta, chairman and managing director of HUL, rural is growing a bit faster than urban. “We’ve seen disruptions in the supply chain in the last 10 days due to localised lockdowns, but we should be able to cover up some of the hiccups.”

Impact: Result is overall good and improved despite Covid -19 outbreak. Good stock to ave in portfolio. 

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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