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Hindustan Unilever 3QFY2014 performance highlights and results update

January 28, 2014, Tuesday, 16:31 GMT | 11:31 EST | 21:01 IST | 23:31 SGT
Contributed by Angel Broking

For 3QFY2014, Hindustan Unilever (HUL)’s performance was largely in-line with our estimates. The company posted a 7.7% yoy growth in its recurring PAT to Rs.946cr. We remain Neutral on the stock.
Key highlights during the quarter: For 3QFY2014 HUL’s top-line rose by 9.4% yoy to Rs.7,038cr. Its domestic consumer business rose by 10% yoy, with a volume growth of 4% yoy. The soaps and detergents division posted a growth of 7.1% yoy, aided by healthy growth in the skin cleansing segment. The laundry segment too posted a healthy growth, aided by premium categories. The personal products division posted a healthy growth of 12.5% yoy, aided by a healthy growth in the skin care, oral and hair care segments. The relaunch of Fair & Lovely aided the growth in the skin care segment. Oral care segments posted a healthy performance, aided by double-digit growth in both - Pepsodent and Close Up. The strong growth in the hair care segment was led by brands such as Dove and Sunsilk. The beverages division posted a growth of 7.2% yoy, aided by a double-digit growth in the tea business. The company’s OPM rose by 130bp yoy to 14.8%, aided by higher gross margin (up 113bp yoy) and lower employee costs. During the quarter, the company reported exceptional gains of Rs.28cr, arising from sale of properties and wrote back excess tax provisions relating to earlier years of Rs.93cr.
Outlook and valuation: We expect HUL to post an ~10.6% and ~11% CAGR in its top-line and bottom-line respectively, over FY2013-15E. At the current market price, the stock is trading at 31.7x FY2015E earnings. We maintain our Neutral view on the stock.