IGI Logo

* HUVR’s performance was in-line with our expectations. It gained market share in more than 75% of its portfolio. Volumes grew 4% YoY during the quarter v/s our expectation of 5%. The pricing growth is expected to taper off gradually, but the management has cautioned that the volume growth may pick up with a lag.

* A&P spends as a percentage of sales during the year were the lowest in the past 18 years. Management commentary highlighted that A&P investments are set to normalize going forward, hence, we expect EBITDA margin to improve to earlier levels, but with a lag.

* We maintain a positive outlook on the stock based on HUVR’s continued market share gains in a challenging consumption environment. HUL’s focus on driving premiumization across categories is standing it in good stead. We reiterate our BUY rating on the stock with a TP of INR3010.

In-line performance

* Reported net sales grew 10.6% YoY to INR148.9b (estimated INR152.6b). EBITDA grew 7% YoY to INR34.7b (estimated INR36.5b), PBT grew 9% YoY to INR33.5b (estimated INR34.8b), PAT (bei) was up 8.2% YoY to INR24.7b (estimated INR25.4b). * Underlying volumes grew 4% YoY (estimated 5%). FY23 volumes grew 5% YoY.

* Segmental performance: Home Care (35% of total sales) revenues were up 18.7% YoY (three-year/four-year CAGR 18.9%/12.6%), Personal Care (35% of total sales) were up 10.1% YoY (three-year/four-year CAGR 10.9%/4.2%), and Food & Refreshment business sales (27% of total sales) were up 2.6% YoY (three-year/four-year CAGR 28.5%/18.6%).

* Segmental EBIT: Home Care margin declined 110bp YoY to 18.7% and Personal Care margin contracted 10bp YoY to 26.1% and Food & Refreshment segment margin contracted 140bp YoY to 17.9%.

* Overall gross margins for the quarter contracted 80bp YoY, while it expanded 120bp QoQ to 48.7% (estimated 49.3%).

* As a percentage of sales, lower ad spends (down 90bp YoY to 8.7%), higher staff cost (up 60bp YoY to 4.6%) and other expenses (up 30bp YoY to 12.2%) restricted EBITDA margin contraction to 80bp YoY to 23.3% (estimated 23.9%).

* FY23 Sales/EBITDA/Adj. PAT grew 15.5%/9%/13.2% YoY to INR591.4b/INR136.3b/INR100.2b.

* The Board has declared a final dividend of INR22.

Management conference call highlights

* Volume grew 5% YoY for the year while the FMCG industry volume declined for the year.

* The management anticipates a decline in price growth going ahead, while expecting volumes to recover.

* Effectively lost 600bp due to commodity cost inflation and have recovered 290bp as of now.

* The company strengthened its market leadership in Tea and widened the gap between itself and the second player.

* The HFD market was adversely impacted due to high inflation in milk.

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer