Partner With Us NRI
Hindustan Unilever Ltd>
  • CMP : 2,442.2 Chg : 0.90 (0.04%)
  • Target : 2,780.0 (12.60%)
  • Target Period : 12-18 Month

28 Apr 2023

Slower volume recovery in BPC, foods segment…

About The Stock

Hindustan Unilever (HUL) is the biggest FMCG company in India with more than 40 brands across categories. It is the market leader in fabric wash, personal wash, cosmetics, shampoos and many other categories.

  • The company has a distribution reach of ~8.5 million (mn) retail outlets with a direct network of more than 3.5 mn outlets
  • HUL commands gross margins of ~50%, which gives it leeway to spend 8-12% on advertisement & promotions
Q4FY23 Results

HUL posted 11% sales growth led by 4% volume uptick.

  • Sales were up 11% YoY driven by strong growth in home care segment
  • EBITDA was at ₹ 3471 crore, up 7.0% YoY, with margins at 23.7%
  • Consequently, PAT was at ₹ 2552 crore (up 9.7 YoY)
What should Investors do?

HUL’s share price has gone up by 68% over the past five years (from ₹ 1464 in April 2018 to ₹ 2469 levels in April 2023).

  • Despite price cuts and a sequential increase in A&P, volumes are still growing at a feeble pace; rural demand recovery is delayed
  • We maintain our HOLD rating on the stock 
Target Price and Valuation

We value HUL at ₹ 2780 i.e. 55x P/E on FY25E EPS.

Key Triggers for future price performance
  • Strong volume growth of 9% in FY23 in home care segment reflects premiumisation trend in fabric wash through surf excel. The company has taken price cuts in term of grammage increase in LUPs, which would aid volume growth in the segment
  • Reliance’s entry into personal care segment could compel the company to take aggressive price cuts, which would keep margins under pressure
  • The company is driving more than 30% of its sales through digital channels like e-commerce, Shikhar app (reach of 12 lakh outlets), D2C, etc.
Alternate Stock Idea

Besides HUL, we like TCPL in our FMCG coverage.

  • Strong innovation and premiumisation strategy in salt, tea, Sampann and Soulful in the Indian market are expected to drive sales and margins
  • We value the stock at ₹ 980 with BUY rating

Key Financial Summary

(| Crore) FY20 FY21 FY22 FY23 5 Year CAGR (18-23) FY24E FY25E 2 Year CAGR (23-25E)
Total Operating Income 38,785.0 45,996.0 51,193.0 59,144.0 0.1 63,850.8 70,331.6 0.1
EBITDA 9,600.0 11,324.0 12,503.0 13,632.0 0.1 14,930.0 16,764.8 0.1
EBITDA Margin % 25.1 25.0 24.8 23.4 - 23.8 24.2 -
Net Profit 6,738.0 7,954.5 8,818.0 9,962.0 0.1 10,670.4 11,993.9 0.1
EPS (|) 31.2 33.9 37.5 42.4 0.1 45.4 51.1 0.1
P/E 79.1 72.9 65.8 58.2 - 54.3 48.3 -
RoNW % 85.7 17.1 18.1 19.9 - 20.6 22.5 -
RoCE (%) 89.5 18.9 20.2 22.0 - 23.7 25.9 -
Source: Company, ICICI Direct Research

Key takeaways of recent quarter & conference call highlights

Q4FY23 Results: Volume grows 4%; margins improve sequentially…

  • HUL witnessed net sales growth of 11% to | 14638 crore led by 4% volume growth & 7% pricing growth. The company has cut prices in soaps earlier in the year, which is reflecting in prices from H2FY23 numbers . Home care, Beauty & Personal care (BPC) & Foods business witnessed a sales growth of 18.7%, 10.1% & 2.6% respectively


  • Home care segment growth of 18.7% was led by mid-single digit volume growth. With softening of crude & related commodity prices, the company has taken price cuts in detergent segment in April-2023. This would be reflected in FY24 numbers


  • Fabric wash category saw double digit value growth during the quarter. Household care (dishwash, floor cleaners) category witnessed double digit volume as well as value growth in Q4. Premiumisation trend continues in with strong growth in Liquid detergent & Surf excel


  • The 10.1% growth in BPC segment was driven by double digit growth in skin cleansing, skin care & colour cosmetics. Skin cleansing growth was led by ‘Lux’. Though, the company has taken price cuts in last six months, the growth in the segment is still largely driven by prices. The company has launched new Skin care Brand ‘Novology’ in Masstige beauty segment


  • Hair care & oral care categories saw mid-high single digit growth during the quarter. Close-Up and premium hair care brands have been growing at a steady pace for the company


  • Foods business growth of 2.6% was aided by mid-single digit growth in ice creams, HFD & foods portfolio. Tea segment saw decline in value term mainly due to down grading in the segment with benign prices of loose tea compared to premium tea. However, tea volumes grew by 3%. Coffee grew in double digit


  • HFD category growth has been adversely impacted by high inflation in milk & Barley. Unseasonal rains during the quarter impacted ice cream sales


  • Home care segment margin was down 104 bps to 18.7%, BPC segment margin was down 15 bps to 26.1% & foods segment margin was down by 138 bps to 17.9%


  • On a full year basis, home care business witnessed a growth of 28% led by 9% volume growth. Surf excel cross US$ 1 bn (> | 8000 crore) in FY23. Liquid home care brands crossed | 3000 crore sales in FY23. The company has been able to develop liquid category over the years, which helped it to drive premiumisation specifically in fabric care category


  • In FY23, BPC segment saw 12% sales growth with low single digit volume growth. ‘Lux’ & ‘Ponds’ cross | 2000 crore sales each. Five BPC brands are | 2000 crore + brands


  • During the year, foods & refreshment segment saw 5% sales growth with low single digit volume growth led by ice cream, coffee & foods. Knorr & Kisaan are growing at faster pace. The company divested Annapurna brand operating in Atta & Salt


  • Though HFD category is struggling to grow in high inflationary (milk & Barley prices remained elevated) period, the company continues to gain market share with new product development. The company has remained market leader in tea segment, it has grown faster compared to nearest competitor


  • Gross margins contracted 84 bps YoY but improved sequentially 120 bps. Employee & overhead spends were up 48 bps & 29 bps, respectively. Overhead spends were higher due to increase in royalty. Marketing spends were cut by 92 bps in Q4FY23


  • Operating profit witnessed growth of 7% to |3471 crore with 89 bps operating margin contraction. Net profit witnessed a growth of 9.7% to | 2552 crore


  • Commodity prices have softened in last six months with crude, soda ash, caustic soda, palm oil have declined by 16%, 6%, 25% & 39% respectively. However, these commodities are still above the 10-year median prices. Barley & Milk prices are still higher by 8% & 18% YoY respectively. Only tea prices have been benign on one year as well as long term median basis


  • With decline in commodity prices, the steep price hikes taken in last two years (cumulative 18%) started coming down with selective price cuts in BPC as well as detergent category. Pricing growth of 12% in June & September quarter has come down to 7% in March quarter


  • FMCG market continues to grow through prices with 11% price growth & flat volume in March quarter. Rural volume still seen declining trend during the quarter. However, the extend of decline has come down continuously

  • Other income saw 31.1% growth due to higher treasury income. Exceptional income includes proceeds from the divestment of Annapurna brand in salt & atta category




I/We, Sanjay Manyal, MBA (FINANCE) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.


Terms & conditions and other disclosures:


ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products.

ICICI Securities is Sebi registered stock broker, merchant banker, investment adviser, portfolio manager and Research Analyst. ICICI Securities is registered with Insurance Regulatory Development Authority of India Limited (IRDAI) as a composite corporate agent and with PFRDA as a Point of Presence. ICICI Securities Limited Research Analyst SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. Registered Office Address: ICICI Securities, Brillanto House Road Number 13, MIDC, Andheri (E), Mumbai - 400 093. CIN: L67120MH1995PLC086241, Tel: (91 22) 6807 7100. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.


Investments in securities market are subject to market risks. Read all the related documents carefully before investing.


Registration granted by Sebi and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. None of the research recommendations promise or guarantee any assured, minimum or risk-free return to the investors.


Name of the Compliance officer (Research Analyst): Mr. Anoop Goyal
Contact number: 022-40701000 E-mail Address: complianceofficer@icicisecurities.com


For any queries or grievances: Mr. Prabodh Avadhoot Email address: headservicequality@icicidirect.com Contact Number: 18601231122

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities and its analysts, persons reporting to analysts and their relatives are generally prohibited from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.


Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.


Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.


ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, and target price of the Institutional Research.


The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.



This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.


ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.


ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.


ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.



ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.


Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.


ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.


Since associates of ICICI Securities and ICICI Securities as a entity are engaged in various financial service businesses, they might have financial interests or actual/ beneficial ownership of one percent or more or other material conflict of interest various companies including the subject company/companies mentioned in this report.


ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.


Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.


We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.


This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.


Read More