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Hindustan Unilever 2QFY2013 performance highlights and results update

Contributed by Angel Broking

Hindustan Unilever (HUL)'s top-line for 2QFY2013 grew by 11.5% yoy to Rs.6,155cr, in-line with our estimates. The recurring net profit for the quarter grew by 25.0% yoy to Rs.805cr, aided by an 83.2% yoy growth in other income to Rs.304cr. However, the underlying volume growth of 7% in the domestic FMCG business is a disappointment. We remain Neutral on the stock.

Key highlights during the quarter: The domestic consumer business grew by 1 6%, with the underlying volume growth coming in at a modest 7%. While the soaps and detergents segment grew by 22% yoy, the personal products segment was up by 12% yoy. The foods division rose by 10% yoy. The management indicated that the overall growth in the quarter was impacted by budget rationalization in the canteen stores department (CSD). The OPM stood at 13.3%, which again was inline with estimates. The gross margins rose by 123bp yoy aided largely by price hikes. HUL increased its advertising and promotion expenses during the quarter, which went up by Rs.118cr on a yoy basis to Rs.769cr. The bottom-line rose by 25% yoy to Rs.805cr aided by an 83.2% yoy growth in other income to Rs.304cr (vs Rs.166cr in 2QFY2012).

Outlook and valuation: We expect HUL to post a ~15.5% CAGR in its top-line over FY2012-14E, largely aided by steady performance of all its major divisions. In terms of earnings, we expect HUL to post a 19.7% CAGR. At the current market price, the stock is trading at 32.0x FY2014E earnings. We maintain our Neutral view on the stock.