Hindustan Unilever 4QFY21 results first cut - YES Securities

Himanshu Nayyar, Lead Analyst - Institutional Equities, YES SECURITIES

Meets expectations on growth, better-than-expected margins drive earnings beat

Revenue - Revenue growth in-line at 34.6% overall and 21% ex-GSK (our estimate of 35%) with volume growth of 16% led by health, hygiene and nutrition portfolios, helped by a low base which saw 9% decline in 4QFY20.

Margins - Gross margins fell by 110bps to 52.6% mainly due to commodity inflation in crude based and palm oil inputs; Lower A&P spends and strong cost controls led to a better than expected EBITDA margin improvement of 150bps to 24.4% (our estimate of 23.9%).

Earnings - PAT came in at Rs 21.3bn (ahead of our estimate of Rs 20.1bn) led by EBITDA beat and lower interest expenses.

Segmental highlights - Home care grew 15% led by strong recovery in fabric wash and double-digit growth in household care with 210bps margin improvement to 21.1%; Personal care grew 20% led by skin cleansing, hair care and oral care with 260bps margin improvement to 27.5%; foods business grew 36% ex GSK and 96% overall led by growth in tea, ketchups, soups and ice creams (GSK portfolio also saw double-digit growth) with margins improving by 380bps to 16.4%.

Management commentary - Continued brand investments, timely price hikes and focused cost savings helped manage inflationary pressures; final dividend of Rs 17 per share taking total dividend for year to Rs 31 per share.

Our view - Numbers marginally beat expectations on account of strong margin performance which should make the stock react positively but with current valuations around 49-50x FY23E earnings and the FY22 outlook not very constructive for staples, we see limited upside of about 10% for the stock from current levels. But given the current volatile environment, we see investors holding on to the stock and infact buy more on dips despite limited return expectations.

Shares of HINDUSTAN UNILEVER LTD. was last trading in BSE at Rs.2409.05 as compared to the previous close of Rs. 2407. The total number of shares traded during the day was 197627 in over 14914 trades.

The stock hit an intraday high of Rs. 2449.45 and intraday low of 2384.1. The net turnover during the day was Rs. 478233927.

Source : Equity Bulls

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