Hindustan Unilever - 4QFY13 Results Update - Motilal Oswal

- 4QFY13 results marginally better v/s expectations: Revenue grew 12.1% to INR64.6b (est INR63.3b). EBITDA margin was 15% (est 14.9%). Adjusted PAT grew 17.7% to INR7.8b (est INR7.2b). Strong double-digit volume growth in Soaps & Detergents (S&D), curtailment in other expenses and significant margin expansion in the Beverages portfolio were the key positive surprises.

- Adjusted volume growth in-line: Volumes grew 6.3% (v/s our estimate of 5.5%), led by double-digit growth in key S&D brands, and the Hair Care and Oral Care portfolios. However, adjusting for the inventory loading prior to transporters' strike in April, volume growth would have been 5.5%.

- Margin expansion driven by benign input costs: Gross margin expanded 110bp to 46.9%, aided by lower raw material cost. Despite higher ad spends (up 95bp), savings on overheads led to EBITDA margin expanding 50bp to 15%. Other expenses as a percentage of sales were at a multi-year low. 51% increase in other income and lower than estimated tax rate of 22.7% (est 25.8%) led to adjusted PAT growth of 17.7% to INR7.8b (estINR7.27b).

- S&D margin expands 70bp; PP margin contracts 210bp: S&D sales grew 12.6%. While EBIT increased 19.7%, margin expanded 70bp to 12%. Personal Product (PP) sales grew 12.1%, while margin contracted 210bp to 25.8%, led by higher ad spends and mix deterioration, as Skin Care posted anemic performance.

- Revising estimates upwards; maintain Neutral; parent launches open offer: We are raising our earnings estimates for FY14/FY15 by ~2%. Maintain Neutral as we expect near term volumes to remain under pressure. Unilever, post the results has launched a voluntary open offer to acquire 22.52% of shareholding at a price of INR600. Consequently, we expect the near term stock price to be a function of open offer related mathematics (acceptance ratio, possibility of increase in open offer price etc).

Source : Equity Bulls

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