Hindustan Unilever (HUL) reported Q1FY22 net sales (up 12.8% y-o-y), Ebitda (up 7.7% y-o-y) and adjusted PAT (up 4.4% y-o-y) ahead of our estimates. Domestic volumes rose 9% y-o-y on a base of -8% y-o-y, ahead of expectations. Growth was broad-based with all segments clocking sturdy double-digit development. April saw sustained development momentum from Q4FY21 subsequently, the shoot-up in Covid instances made May a difficult month. June marked a rebound to Mar-21 levels all in all, HUL exited the quarter on a sturdy note.
Overall, an enhancing portfolio mix combined with expense manage, value hikes and synergies from the GSK takeover really should help Ebitda margin regardless of inflationary input costs. Retain Buy with a TP of Rs 2,900.
Broad-based development: HUL logged sturdy volume development of 9% y-o-y regardless of the second wave. The business has ramped up e-commerce operations, whose contribution has doubled considering the fact that Q1FY21. 80% of the enterprise is gaining relative penetration. The home care segment grew 12% y-o-y enabled by double-digit development in Fabric Wash. Beauty & Personal Care grew 13% y-o-y led by Hair Care and Skin Care, each increasing in higher double-digits. Foods & Refreshment delivered an additional quarter of sturdy efficiency, up 12% y-o-y.
The HFD portfolio is gaining penetration sequentially its volumes grew in mid-single digit. Gross margin dipped 146bps y-o-y due to a spike in inflation in a handful of crucial raw components (tea, palm oil) q-o-q, gross margin dipped 216bps due to the second wave’s influence on the discretionary portfolio. Cost optimisation restricted Ebitda margin dip to 114bps y-o-y.
Conference contact takeaways: Q1FY22 pricing is ahead of Q4FY21. The sequential reduced distinction in worth and volume is down to Covid-led promotions volatility. With commodity costs at multi-year higher levels, the business is seeking to make sensible pricing choices to keep its healthier volume development. As mobility improves, the mix would strengthen therefore margins also will strengthen.
Outlook: On a firm footing – We anticipate HUL to be a crucial beneficiary of sturdy rural demand. Demand predicament is dynamic although due to Covid-19 uncertainty nevertheless, HUL is properly placed in terms of provide chain preparedness. We retain ‘BUY/SO’ with a TP of Rs 2,900. The stock is trading at 51.5x FY23e EPS.