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Reboots with WINI at the heart of new growth strategy

We attended HUL's analyst meet, where management expressed confidence in achieving volume-led revenue growth. HUL new strategy indicates shift from WIMI ( winning in many India’s) to WINI (winning in new India) with focus on 1) increasing premiumization 2) higher usage of products 3) market making and entry in new high growth categories. HUL plans to step up investments in capex, new innovations, entry in high growth segments and market making by utilizing savings from sourcing, premiumization, cost savings and media effectiveness. HUL has raised the upper band of its EBITDA margin guidance to 22-24% from 23.5% with focus on volume led growth.

HUL aims to derive 40% of delta from consumption and premiumization, 40% from an increased user base, and 20% from innovations. We believe competitive intensity is likely to remain elevated in Home Care and Toilet Soaps; however, the company's initiatives in Beauty & Wellbeing and Nutrition are expected to offset this pressure. Innovation, premiumisation and cost savings led margin outlook is positive for LT, however higher inflation and El Nino led pressures can weigh on growth and margin outlook in near term. We estimate a CAGR of 9% in Sales and 8.8% in PAT over FY26- 28. HUL trades at 38.6xFY28 EPS which is at lowest point in last decade. We believe risk reward remains favorable given 2%+ dividend yield. Retain Accumulate with target price of Rs2320 (45x FY28).

Key Other Highlights

* HUL is shifting gears from WIMI (winning in Many India’s) to WINI (Winning in New India) which considers rising income, more accessibility due to infrastructure, increase play of digital and data accessibility as key drivers.

* HUL plans to undertake cost savings of 500bps over next 3-5 years which will provide fuel for growth and enable profitable volume led growth.

* HUL aims to drive growth across categories by focusing on

1) New spaces (formats and segments), market making (adjacent segments like Fabric conditioners, hair serums and nutrition), premiumization (sachets to bottles and from economy and mid end to premium brands) and more usage (increasing frequency).

* HUL believes in significant headroom for growth as usage gap between affluent and value consumers in India varies between 20-70% depending upon various categories which are otherwise mature segments.

* Demand remains stable amid macro volatility, with revenue growth expected to be volume-led (measured by number of packs, not tonnage)

* HUL is focusing on competitive volume-led growth, with 40% of incremental delta expected from increased consumption and premiumization, and the remaining 40%/20% coming from market making and entry in new categories.

* Management has raised EBITDA margin guidance to higher end of 22–24%, from the earlier upper band of 23.5% and expects no impact on margins under the current inflationary scenario.

* Growth in the gross margin-accretive portfolio is expected to be 1.5x faster than the rest of the portfolio.

* The company plans to increase investment behind premium portfolio by 2x, 60% digital advertising and focus on emerging channels to drive growth.

* HUL's market share gains in the premium segment are running at approximately 1.3x the pace of gains in the mass segment, underscoring premiumization momentum.

* HUL is leading market making in hair masks, suncare, body wash, dish wash liquid, laundry liquid and face washes which have penetration of just 1,2,2,7,13 and 17% respectively.

* HUL has undertaken significant makeovers of brands like Dove, Vaseline, Minimalist, Kissan, Horlicks by way of innovations and brand extensions.

* HUL has identified host of new segments which have high growth, it will enter many such segments depending upon its right to win, profit pool and sustainable growth.

* New launches and brands are expected to be margin-accretive for the business.

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