HUL - 3QFY2013 Result Review - Angel Broking

HUL (CMP: Rs.482 / TP: - / Upside: -)

HUL has delivered a disappointing set of numbers for 3QFY2013. 5% underlying volume growth for domestic consumer business is the lowest in the last three years. Net sales rose by 10.3% yoy to Rs.6,434cr. While the low margin Soaps and Detergents division posted a 20% sales growth, the Personal Products division disappointed with a modest 13% sales growth. OPM fell by 122bp yoy to 13.5%, due to higher input costs and Rs.132cr of higher advertisement and promotion expenses (up 100bp yoy). The bottom-line rose by 15.6% yoy to Rs.871cr, aided largely by the 85.5% increase in other income to Rs.355cr.

The Board of Directors of the company has approved an incremental royalty payment of 1.75% of turnover payable to the parent group Unilever. Currently the company pays 1.4% of turnover as royalty, which will be increased to 3.15% based on a new agreement which would be effective from February 1, 2013.The royalty would be increased in a phased manner from February 2013 till March 31, 2018. For the period February 1, 2013 to March 31, 2014 the additional impact would be 0.5% of turnover. We expect the increase in royalty to have an impact of Rs.0.5/share on FY2014E EPS. We maintain our Neutral view on the stock.

Source : Equity Bulls

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