BackWant to invest in HUL post-Q4 earnings? Here's what 3 brokerages have to say
HUL had implemented calibrated price increases across its portfolio to offset the considerable increase in input costs.
PremiumFMCG giant Hindustan Unilever Ltd (HUL) on Wednesday announced its fourth-quarter results. The company reported a profit after tax of Rs 2,327 crore in the March quarter, up by 9% as compared with the Rs 2,143 crore reported in the year-ago period.
Profit for the fiscal year from April 2021 to March 2022 increased by 10.9 percent to Rs 8,818 crore, up from Rs 7,954 crore in the previous fiscal year.
HUL's standalone Q4 revenue from operations stood at Rs 13,462 crore, an increase of 11% from the previous corresponding quarter's figure of Rs 12,132 crore.
Revenues for the full year increased 11.3 percent to Rs 51,193 crore, up from Rs 45,996 crore in FY21.
Its Ebitda (earnings before interest, tax, depreciation, and amortisation) was Rs 3,245 crore in the March 2022 quarter, up 10% from the previous quarter.
HUL's homecare business grew by 24 percent year on year, aided by strong performance in fabric wash and household care. Both these categories grew by double-digits. Liquids and fabric sensations also returned strong numbers during the quarter.
During the third quarter, Beauty & Personal Care (BPC) grew by 4% year on year, led by double-digit growth in skin cleansing. The growth was driven by pricing and a strong performance by its Lux, Dove, and Pears brands. The hair care division of the company witnessed market share gains during the quarter.
Financials
| Key Financials (Rs Cr) | FY21E | FY22E | FY23E | FY24E |
| Net sales | 45,311 | 50,336 | 56,014 | 63,497 |
| EBITDA | 11,324 | 12,503 | 12,893 | 15,210 |
| Net profit | 7,9654 | 8,818 | 8,925 | 10,534 |
| EPS (Rs) | 33.8 | 37.5 | 38.0 | 44.8 |
| PER, x | 68.7 | 63.5 | 63.0 | 53.3 |
| EV/EBITDA | 49.0 | 44.2 | 42.8 | 36.1 |
| P/BV, x | 11.8 | 11.6 | 11.5 | 11.2 |
| ROE, % | 17.2 | 18.3 | 18.2 | 21.0 |
| Source: Axis Research |
Outlook
Brokerage firm Axis Securities said that HUL gross margins were affected more severely owing to hyperinflation across key raw material baskets (crude/palm oil/plastics/soda ash up 60%/60%/20%30% YOY).
Axis Securities initiated coverage on the stock with a "buy" recommendation and a Target Price (TP) of Rs 2450/share, implying an upside of 14% from the current CMP. It also lowers EPS estimates for FY23–24E by 11%–7% and lowers the target multiple from 56x to 55x to account for this short-term volatility.
HUL's long term growth prospects will remain strong as management uses razor-eyed focus to drive: a broad-based portfolio and straddling across price-value matrix; focus on cost savings initiatives; strong execution capabilities vs. peers in such a challenging environment; strong data analytics capabilities, the report added.
Further, it said that HUL has delivered on its strength through its diverse product portfolio and strong financial prowess in this volatile and challenging environment.
ICICI Securities on the other hand expects HUL's margins to contract in FY23E on account of incessant inflation in crude, palm oil and other important commodities.
HUL is valued at 55x P/E on FY24E EPS to arrive at a TP of Rs 2,200. "Maintain HOLD," says ICICI Securities.
Meanwhile, HDFC Securities says the demand outlook remains a concern for HUL, with volume decelerating in both rural and urban India. RM inflation has continued to have an impact on gross margin, it says.
"With geopolitical issues aggravating commodity inflation, we are building in margin pressure for the near term. With ongoing demand disruptions in mass segments and structural pressures from new-age brands in the premium space, we see limited surprise opportunities for HUL, "says HDFC securities.
An average of 37 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
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