IGI Logo

Hindustan Unilever Ltd (HUL) is India’s largest FMCG player having ~44 brands spanning 14 distinct categories largely grouped into home care, beauty & personal care, food & refreshments & others.

The recent merger of GSK is significantly accretive for HUL as GSK is one of the key players in the foods and refreshment (F&R) category with a wide product portfolio (includes iconic brands such as ‘Horlicks’ and ‘Boost’).

The acquired portfolio is complementary to the current offerings of HUL in the F&R category. Combined with HUL’s vast distribution, we believe that HUL can significantly grow its F&R portfolio both in the short as well as in the long run.

We initiate coverage on HUL with a BUY for a price target of Rs 3,185 representing a potential upside of 34.8% over the next 24 months (We have used the DCF method to value HUL).

Our optimism stems from the following:

We expect revenues to grow at a CAGR of 7.8% over FY21-24E to Rs 58,924 crores.

* 4.7% CAGR in home care revenues to Rs 16,000 cr.

* 4.3% CAGR in beauty and personal care revenues to Rs 20,484 cr.

* 15.1% growth in food & refreshment revenues to Rs 20,122 cr.

* 8.2% growth in other revenues to Rs 2,319 cr. FMCG companies typically do well in an inflationary environment.

This combined with a better product mix, increasing e-commerce penetration and higher utilisation should lead to an increase in EBITDA margins by ~100bps to 25.7% by FY24E. This should lead to a faster pace of growth of 9.3% CAGR in EBITDA to Rs 15,161.4 cr and PAT to Rs 10,425.8 crores respectively over the same period.

To Read Complete Report & Disclaimer Click Here

SMS subject to  Disclosures and Disclaimer goo.gl/8bCMyQ VENTURA

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