Hindustan Unilever - Q2FY21 First Cut - ICICI Securities

(CMP - Rs. 2170, MCap - Rs. 5,10,875 crore)

Hindustan Unilever's (HUL) Q2FY21 numbers were better than our expectations on both the revenue & earnings front.

Q2FY21 Earnings Summary

- Revenues increased 16.1% to Rs. 11442 crore (I-direct estimate : Rs. 11005 crore ) led by the 83% growth in foods segment mainly on account of consolidation of acquired business (Horlicks, Boost, VWash). On a like to like basis, the company witnessed a 3% sales growth. Health, Hygiene & Nutrition, which is 80% of the product portfolio witnessed a double digit growth

- Home care segment witnessed a 1.6% decline mainly on account of price cut in detergent segment. Beauty & personal care segment saw flat sales largely due to muted sales in skin care & cosmetics. However, personal wash & sanitiser segment continued to witnessed strong growth during the quarter. Foods segment saw strong growth led by high growth in tea & coffee. The company took price hike in tea segment to pass on the sharp increase in tea procurement prices

- The company was able to maintain operating margins at 25.1% (up 27 bps) with 221 bps lower advertisement spends, which largely offset the gross margin contraction of 145 bps. We believe ~80% increase in tea prices would have led to the gross margin contraction. Advertisement spends was down by 5% on an absolute basis. We believe lower advertisement spend are largely on account of lower ad rates & gradual pick up in marketing campaigns

- Net profit increased 8.7% to Rs. 2009 crore (I-direct estimate: Rs. 1977.9 crore). The slower growth in profitability is largely due to lower tax in base quarter. The company declared an interim dividend of Rs. 14/share

With the strong growth in health, hygiene & nutrition products, 80% of the company's portfolio is witnessing double digit growth. However, some of the discretionary categories continued to see muted growth due to gradual increase in out of home activity. We believe Q3 would see a normal demand conditions which would lead the growth even in the discretionary categories. The company was able to manage operating margins despite steep increase in tea prices is commendable. We expect strong growth tailwinds across categories with complete normalisation in out of home activity. We remain positive on the stock.

We will be coming out with a detailed update post the conference call with the management.

Shares of HINDUSTAN UNILEVER LTD. was last trading in BSE at Rs.2172.1 as compared to the previous close of Rs. 2178.8. The total number of shares traded during the day was 272156 in over 20222 trades.

The stock hit an intraday high of Rs. 2207 and intraday low of 2133. The net turnover during the day was Rs. 591372681.

Source : Equity Bulls

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