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  • Hindustan Unilever Ltd (HUL) Q1 results: 5 things to know

    Publish Date: 18th July, 2018

    Ponds, Lux, Close Up, Bru coffee and Vaseline are some of the popular everyday items that you can find in almost every store in the country. All these products (and more) come under the single giant umbrella of Hindustan Unilever Ltd. (HUL): the country’s largest Fast Moving Consumer Goods (FMCG) company. On 16 July 2018, the company announced its results for the first quarter of FY19.

    Here is a snapshot of the Q1 results for the FMCG behemoth.

    Earnings snapshot?

    Rs 1,529 crore 19.2% Rs 9,487 crore 11%

    Beyond P&L: A closer look

    The company registered a 12% volume growth in line with estimates for the quarter. This marks the third consecutive quarter of double digit growth for the company. In addition, it displayed a strong double digit performance across all three divisions of: home, personal care and food.

    Management commentary

    The management said that demand has picked up, especially in the rural segment where growth has increased faster compared to urban growth.

    At present, the company has been consistently delivering higher margins and has been growing ahead of the industry. However, the management believes that it may not be possible to sustain the current level of super normal growth in the long run.

    Stock market reaction

    The HUL share price ran up early on Monday ahead of the financial results for the quarter. However, the stock price plunged by more than 2% when markets opened on Tuesday. On a year-to-year (YoY) basis, the company’s shares rose by more than 50%, increasing from Rs 1,152.95 on 17 July 2017 to Rs 1,751.25 on 16 July 2018.

    Kotak Securities stock recommendation

    HUVR’s 1QFY19 earnings print, while marginally below our estimates, was strong enough to keep the multiple-expansion theme going, in our view. Acceleration in underlying consumer off-take, generally benign competition and the flow-through of indirect benefits of GST (portfolio premiumization, supply chain savings, etc.) are likely to keep earnings momentum strong for the next few quarters, at least.

    We raise our FY2019-21E EPS forecasts by 4-5% and our DCF-based June 2019 fair value target to Rs 1,570/share (from Rs 1,430). REDUCE stays.

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