Hindustan Unilever (HUVR)’s Annual Investor Meet after once more underlined the immense moats the enterprise has and the exceptional nimbleness it has exhibited and continues to exhibit regardless of becoming a lot bigger than peers. Mgmt shared information on the augmentation of its analytics and R&D strengths, which had been currently far superior v/s peers.
As highlighted in our Annual Report note, there have been a host of initiatives in the previous year focusing on the burgeoning E-Commerce marketplace, which now contributes 8–9% to HUVR’s sales. The company’s portfolio is currently effectively-placed, with its E-Commerce marketplace share greater than its Modern Trade (MT) marketplace share, which, in turn, is greater than its General Trade (GT) marketplace share.
Winning in Many Indias (WiMI) has been a essential aspect driving volume development and marketplace share gains for the enterprise in current years. However, the localisation of items as effectively as communication is only gathering additional steam – of which the enterprise stated quite a few examples at the analyst meet in categories ranging from Foods to Beauty and Personal Care (BPC) – and ought to be a essential driver of development for quite a few years to come.
In the previous decade, the enterprise has seen a 9% sales CAGR and Ebitda margins have expanded ~1,000bp (regardless of the constant guidance for modest improvement in operating margins). This was in spite of considerable disruptions in the kind of weak rural development in the second half of the decade, demonetisation, GST, and COVID. Mgmt is aiming for double-digit EPS CAGR more than the next 10 years, led by best line. With the extended runway for development in FMCG in India, rising premiumisation, and synergies from GSKCH, we think earnings could continue to compound at 14–15% more than the next 10 years, equivalent to development in the preceding 10 years.
The demand outlook is healthful as superior rural development in current quarters would be sustained by superior kharif (monsoon crop) sowing and recovery in the urban markets post the lockdown influence in Q1FY22. Commodity fees, when nonetheless elevated, have remained steady on a sequential basis, enhancing the margin outlook, in particular with additional cost increases taken in Skin Cleansing, Detergents, and Tea in Q2FY22.
There is no material transform in our forecasts. We preserve a Buy rating, with TP of `3,280 (60x Dec’23e EPS).