Hindustan Unilever Ltd has stepped up focus on volume growth and it would continue investments in business notwithstanding margin pressure

Chirag Batavia • 8 February 2021

Hindustan Unilever Ltd

 In Q3FY21, HUVR reported 4% growth in underlying volume, 7% growth in revenues and broadly flat EBITDA (all organic).

 Post recent quarters of cautious commentary, HUL expressed increased confidence in pick-up in overall demand environment.

 HUL maintained the innovation intensity witnessed in recent quarters with multiple new launches in line with increased consumer preference for hygiene, nutrition and at-home consumption.

 We note that in 9MFY21, HUVR has absorbed some RM inflation in tea and soaps and stepped up investments in advertising & promotion (A&P) for market development/share gains in hygiene, personal care and nutrition categories.

 The management indicated that (1) its primary focus in the short term (1-2 quarters) is volume recovery/growth and investments (especially A&P) in business would remain high, and (2) it is confident of delivering modest margin expansion every year in the medium term.

 HUVR has stepped up focus on volume growth and it would continue investments in business notwithstanding margin pressure; we expect this strategy to pay off well.

Hindustan Unilever Ltd: ADD
Dated: 8th February 2021
CMP: Rs.2270
Fair Value: Rs.2625
Potential Upside: 15.6%
Market Cap: Rs. 5,32,899 Cr
Time Frame: 12 months

Note: The above is a brief note on the company, based on the inputs of KIE research report dated 27th January 2021, which is available on their website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental.       
Disclaimer: http://bit.ly/2n5AxIE



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