Hindustan Unilever Ltd, Financials Q2FY'13: Key Takeaways
HUL reported moderate numbers in Q2FY’13 with concerns over volume growth pressures and poor performance in some segments like packaged foods. Revenue saw a ~12% YoY growth, extensively below our estimates by a good ~12% at 61,554 mn. Though, net grew by ~8% YoY to 8,055, but disappoints our net estimates by staggering margin, over doubling of tax by ~51% YoY.

Net sales for the period Q2FY’13 have increased by ~12% to 61,554 mn. During the quarter, the Domestic Consumer business grew at ~16% with underlying volume growth of ~7%. Overall growth in the quarter was impacted by the budget rationalization in the Canteen Stores Department. Soaps and Detergents grew ~22%, double digit growth across all segments. Laundry delivered another quarter of strong performance with all brands and formats growing in double digits. The focus on driving up-gradation saw both Surf and Rin register double digit volume growth. Comfort fabric conditioners continued to lead market development; the portfolio was expanded with the launch of the One Rinse variant. Household Care also registered double digit growth. Skin Cleansing sustained its broad based growth momentum. While Dove and Pears are driving category premiumization, Lifebuoy recorded one of its highest growth rates. The liquids portfolio saw accelerated growth led by Lifebuoy Handwash and Lux Body wash. Personal Products grew ~12%, growth stepped up in Hair and Oral. Hair delivered a strong quarter with broad based growth. During the quarter, the TRESemmé brand was launched in India with an exciting proposition of ‘salon style hair at home everyday'. The portfolio was further strengthened with the re-launch of Clinic Plus and a new Hair Fall Rescue range under Dove.

Stock Valuation & Outlook: Q1-Q2FY’13 has witnessed a very healthy growth for the company, both on the revenue side and profitability due to excellent product mix through cost increase, newer products, enhanced dealers network and corner-to-corner presence. Margin pressure to be in space for sometime more (we expect till Q3FY’13E). However, stock appreciation (a light push) will be aided by HUL’s strategic success. We remain somewhat neutral at this moment as HUL is trading at a P/E of 10-Yr high (on our FY’13E earnings estimate). At CMP, the stock trades at a P/E of 10-Yr high P/E of ~41.0x & P/BV of ~16.6x of FY’13E EPS and BVPS, which we feel is much stretched. We remain NEUTRAL on HUL, with a revised TP of 575 (with a potential ~7.8% return from CMP). Our TP is arrived at a P/E and P/BV of ~44.2x & ~18.0x respectively of FY’13E EPS of 13 & BVPS of 32.