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BUY Hindustan Unilever

Recouping execution prowess, a positive
Consumer Goods  Company Update  September 6, 2024 TARGET PRICE (Rs): 3,200

HUL’s premium valuations are attributed to its forward-looking execution, focus Target Price – 12M Sep-25
on emerging categories, extensive distribution network, and strong parentage. Change in TP (%) 3.2
We anticipate continued success under the new team, noting positive impacts Current Reco. BUY
from recent actions such as a focus on product superiority (which should Previous Reco. BUY
enhance share), sustained premiumization (supports consumer upgrades and Upside/(Downside) (%) 12.7
margins), and commitment to high-growth areas and future-oriented channels. CMP (06-Sep-24) (Rs) 2,839.6
In the laundry segment, HUL is driving premiumization by focusing on liquids.
Formulation changes to the soaps portfolio are effective, likely enhancing Stock Data HUVR
market share and providing a competitive edge. In beauty care, HUL has
52-week High (Rs) 2,866
intensified its efforts with Lakmé and Pond's by utilizing specialized distribution
52-week Low (Rs) 2,170
channels. We retain BUY with new Sep-25E TP of Rs3,200/sh, with PER of 58x.
Shares outstanding (mn) 2,349.6
Market-cap (Rs bn) 6,672
Hindustan Unilever: Financial Snapshot (Consolidated) Market-cap (USD mn) 79,475
Y/E Mar (Rs mn) FY23 FY24 FY25E FY26E FY27E Net-debt, FY25E (Rs mn) -121,889

Revenue 591,440 604,690 638,538 699,165 762,201 ADTV-3M (mn shares) 2

EBITDA 136,320 141,900 153,485 170,277 188,594 ADTV-3M (Rs mn) 6,038.0

Adj. PAT 97,200 99,849 109,411 122,271 135,959 ADTV-3M (USD mn) 71.9
Adj. EPS (Rs) 41.4 42.5 46.6 52.0 57.9 Free float (%) 38.1

EBITDA margin (%) 23.0 23.5 24.0 24.4 24.7 Nifty-50 24,867

EBITDA growth (%) 9.0 4.1 8.2 10.9 10.8 INR/USD 83.9

Adj. EPS growth (%) 11.4 2.7 9.6 11.8 11.2 Shareholding, Jun-24
RoE (%) 19.6 19.7 21.4 23.7 26.1 Promoters (%) 61.9
RoIC (%) 20.5 21.4 24.5 27.7 31.5 FPIs/MFs (%) 11.9/14.2
P/E (x) 68.7 66.8 61.0 54.6 49.1
EV/EBITDA (x) 48.4 46.2 42.7 38.4 34.6
P/B (x) 13.3 13.1 13.0 12.9 12.8 Price Performance
FCFF yield (%) 1.3 2.1 1.6 1.9 2.1 (%) 1M 3M 12M
Source: Company, Emkay Research Absolute 3.3 11.4 12.5
Rel. to Nifty (0.4) 2.2 (11.3)

Broad strategy in place for recouping growth and enhancing market share

We see improvement in topline performance on the back of HUL’s four-pronged strategy. 1-Year share price trend (Rs)
Its strategy includes attaining product superiority, further to which it has laid out six 2850 Rs % 10
parameters for improvement. Recent initiatives are in place in the soaps portfolio, where
2710 2
formulation changes have reduced dependence on palm oil. Regarding products, the
thrust is on premiumization with tangible benefits, where it has seen 300bps mix 2570 -6

improvement in the last 3 years. HUL looks to maintain its thrust on reshaping the 2430 -14
portfolio in high-growth spaces, where it has identified categories like home care liquids,
2290 -22
beauty, body wash, and international cuisines. Amid the evolving consumer base, the
channel of future remains key for growth. HUL is engaging with channel partners to better 2150 -30
Sep-23Nov-23Jan-24Mar-24May-24 Jul-24 Sep-24
address consumer needs.
HUVR IN Equity (LHS) Rel to Nifty (RHS)

Efforts on to revive growth across segments

For the fabric care segment, the company continues to leverage its portfolio price
straddle where liquids maintain faster growth. Surge in competition in liquids is working
positively toward driving consumer shift; HUL now has an affordable Rs99/800ml pack
under Rin and LUPs at Rs10. In soaps, we see actions with formulation change for Lux
and Lifebuoy to help the company arrest competitive stress (products in the market Nitin Gupta
effective Mar-24). In skin care, we see actions to contemporize (Jul-24) Glow and Lovely nitin.gupta@emkayglobal.com
in order to aid growth recovery. Additionally, HUL has stepped up intensity of product +91 22 6612 1257

launches for Lakmē and Ponds, where it is aligning its offerings with consumer
Pinky Mahato
requirement and has a specialized distribution channel. Tea is expected to recover from pinky.mahato@emkayglobal.com
Q2, with better rains aiding demand. +91 22 6612 1306

Focused execution with demand recovery to aid; maintain BUY

As the new leadership solidifies its footing, we see HUL getting its strategies in shape
and expect visible improvement in performance going ahead. Volume growth is poised
to gradually extend into high-single digit. We maintain 8% sales CAGR / 11% earnings
CAGR, over FY24-27E. As we roll over from Jun-26E to Sep-26E, our TP increases from
Rs3,100 to Rs3,200/share (on 58x P/E). We maintain a BUY rating on the stock.

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Hindustan Unilever (HUVR IN) India Equity Research | Company Update

Enhanced execution competency is heartening

HUL has been at the forefront of innovation and category creation in the past, which was sort
Annual report analysis for of lost in the last five years, where the company had gone defensive in protecting its turf. Now,
FY24 under the new management, we sense aggression coming back in execution where the
company is looking at superior brand positioning, driving premiumization, focusing on high
growth spaces, and leading in channel of future with enhanced execution prowess. The
company has started thinking ahead of market and is prepared to take bold calls.

Our on the ground checks in the recent past suggests that aggression is back to not only
counter competition but also gain market share. Here are certain actions which we see as
rewarding for HUL in the medium-to-long term:

Soaps formulation changes for Lux and Lifebuoy

The company in its Q1FY25 earnings call has announced the launch of a new patented
technology for Lux and Lifebuoy. As per the management, Stratos is a first of its kind
groundbreaking technology developed and patented by HUL’s R&D team. The company took
about 5 years for development with 20-plus patents filed, making it possible to reformulate the
soap with a proprietary mix including plant-derived polysaccharides, vitamin blends, and skin
care actives. Formulation change not only improves the product, but also reduces the non-
functional TFM from the soap by using smart structuring technologies and include more skin
health actives that can provide new and better benefit to the consumers.

Exhibit 1: Stratos introduction for skin cleansing

Source: Company

Reduction of TFM is unlikely to affect soap quality

Stratos is built in India, for India, and patented world-wide. In Soap formulation, TFM is used
for two reasons (with equal contribution of 20% each) – i) Laddering and cleaning, and ii)
Balance for structuring of the soap. As per the company, even if soap consists of 100% TFM,
it will not give better feel as the requirement is half of the TFM added in soap. Additional TFM
is for foaming, which eventually gets washed out. Comparatively, in Body wash, cleansing is
superior to soap where TFM is 20%.

Formulation change makes product sustainable and reduces forex risks

“Lesser palm oil in our As per the management, there is no correlation between TFM and product quality. Reduction
soap, combined with use of of TFM is getting replaced with added vitamin mixes and natural fatty acids, which improve
sustainable palm, drives a cleansing and skin feel. For soap structuring, the company has used polysaccharides which has
multitude of benefits from aided reduction in palm oil. This, also aligns with HUL’s broader sustainability goals by
reduced reliance on a forex minimizing environmental impact. With India being one of Unilever’s largest soap markets
dependent commodity to globally, the successful implementation of the Stratos technology by HUL sets a precedent for
reduced imports and its adoption across other markets by the parent company. This innovation is poised to
reduced greenhouse gas revolutionize soap production by demonstrating that superior product performance can be
emissions.” achieved with reduced reliance on palm oil derivatives. As the usage of palm oil goes down, its
forex exposure also reduces.
- Rohit Jawa, CEO, HUL

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September 6, 2024 |2
 Hindustan Unilever (HUVR IN) India Equity Research | Company Update

Exhibit 2: New packaging of Lux highlights added benefit of Vitamins

Lux is now a bathing soap

vs toilet soap in the past

Source: Company

Exhibit 3: Lux older pack back disclosures Exhibit 4: Lux new pack back side disclosures

Source: Company
Source: Company

New products active in market for the past 3-4 months

The company claims to have tested the efficacy and benefits of the new soap formulation on
thousands of Indian consumers, apart from independent clinical studies and lab tests. The
results are unanimous. New formulated products have tested as being superior across the
country and the results have been published and presented in top international journals and
conferences. Our ground checks suggest that new formulation soaps are active pan-India since
last 3-4 months. We believe this is sufficient time to gauge if there is any dilution in quality.
We expect positives in the form of market share gains to be visible in the medium term.

Price correction for Rs10 SKU to have a bearing on growth in the near term

We see actions to increase volume for the Rs10 SKU has helped the company arrest competition
at the mass-end. While we see lower pricing to have a bearing in the near term, the gradual
inflation in raw materials will help the company effect price hikes.

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September 6, 2024 |3
Hindustan Unilever (HUVR IN) India Equity Research | Company Update

Exhibit 5: Palm fatty acid distillate (PFAD) prices

2,100
1,900
PFAD prices have seen 14%
1,700
inflation in the last six 1,500
months

(USD/mt)
1,300
1,100
900
700
500
300

Dec-19

Dec-20

Dec-21

Dec-22

Dec-23
Apr-20

Apr-21

Apr-22

Apr-23

Apr-24
Aug-19

Aug-20

Aug-21

Aug-22

Aug-23

Aug-24
Source: Bloomberg, Emkay Research

Aggression in Detergents with Rin

The company has been at the forefront of driving consumer upgrade from powder to liquids.
In the last one year, as the penetration of washing machines has seen an uptick, national
players have become aggressive in entering liquid detergent segments. Godrej Consumer with
proprietary formulation and leveraging expertise of Godrej Industries, has launched Fab liquid
detergents at disruptive pricing of Rs100. Along similar lines, we have seen a surge in regional
players capturing market share in the fast-evolving liquid detergent segment.

HUL has been a wide leader in liquid detergents with its offering under Surf Excel. Now reacting
to the competition, the company has strategized with its popular brand Rin, where it is
effectively pricing Rin at Rs99 for the 800ml SKU. We see that being competitive in the category
is easy as dilution of liquid will help lower price product further. Premium products in the
segment are relatively thicker to new mass-priced offerings. Consumer understanding is likely
to be in place soon, after which only the player with better cleansing expertise will gain share.

Exhibit 6: Godrej Fab liquid priced at Rs99/ltr Exhibit 7: Rin matic priced at Rs99/800ml

Source: Company Source: Company

Market shift is likely to accelerate with affordability of liquids

Leading players in the segment see the India laundry market transitioning like China, where
we now have near equal share of overall laundry market into powder and liquids. What really
works in the China market is the liquid product pricing being at par with powder, which drove
consumer acceptability. In India, liquids under premium brands, have historically been priced
at a premium. But with recent launches at the Rs99 price point, consumers do see the case for
using liquid even in bucket wash.

Actions in place for skin and color cosmetics

With changing lifestyles, increasing disposable incomes, and higher exposure to global trends,
Indians are looking for premium beauty products. The company is extending its current brands
into high-demand premium spaces by introducing new formats, while launching brands to
capture new demand spaces. To bring more focus to its portfolio in the Beauty and Personal
Care businesses, the company has transitioned into two separate businesses – Beauty &
Wellbeing, and Personal Care from 1-Apr-24.

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September 6, 2024 |4
Hindustan Unilever (HUVR IN) India Equity Research | Company Update

HUL, after addressing portfolio gaps in Ponds has started routing the brand through the
specialized Lakmē channel, as per our ground checks; while general trade distributors continue
distributing mass-end offering under Glow and Lovely. In the last couple of years, the company
has addressed loose ends, but we see the recent under delivery in core segments as
concerning. Going ahead, the company is looking to take leadership in devising Indian beauty
trends by leveraging its parent’s portfolio. HUL has forged joint business planning with modern
retail partners and created a team of experts to connect with dermats and chemists.

Joint business planning in place to drive beauty care

The company has
The company has seen significant transformation across iconic brands with refreshed products,
undergone significant
packaging, and communication. In its journey of becoming the ‘beauty shapers of the country’,
transformation across key HUL unveiled the Beauty Collective. Through this, it aims to strengthen beauty partnerships
brands like Lakmē and with e-commerce and modern trade customers. The company has advanced its journey to
Vaseline, revamping them transform its portfolio toward high-growth spaces.
by refreshing product,
Exhibit 8: Innovations and activations in the Beauty and Personal Care segment
packaging, and
communication, and
innovating into new
demand spaces and formats

Source: Company

Leveraging data and analytics

The company has state-of-the-art data democratization platform ‘Chanakya’, and it is a critical
enabler for data-driven decision making across the organization. The company continues to
leverage machine learning and artificial intelligence across business processes to embed
intelligence in decision making as well as drive productivity across processes, e.g. commodity-
price forecasting, market-mix modeling, and assortment analytics. To address dynamic
demands in the digital era, the company established an Agile Innovation Hub a few years ago.
The Agile Innovation Hub has aided in the launch of >50 new products in the market. Some
notable innovations include that of Lakmē Sun Expert sunscreen and Glow & Lovely Hydraglow
serum cream in skin care.

The company has created an Rs20bn portfolio across face cleansing, post-wash hair treatment,
More than 30% of media light moisturizers, serums, sun-care, and masstige, and this portfolio continues to grow faster
spend is now digital, where than rest of the portfolio.
digital spend for premium
Exhibit 9: Multi-year bets
products is relatively high

Source: Company
1. USG and Turnover for FY24
2. E-com growth on gross sales value for FY24

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September 6, 2024 |5
Hindustan Unilever (HUVR IN) India Equity Research | Company Update

Exhibit 10: Evolving beauty trend in India Exhibit 11: Beauty basket continues to see expansion

Source: Nykaa Source: Company

Exhibit 12: Legacy brands thrust is on product and trends, than on Exhibit 13: Brands are mushrooming, but <3% are >Rs1bn in size
brand

Source: Nykaa Source: Company

Expertise of Unilever Prestige can be leveraged in the future

Unilever had launched Unilever Prestige for the luxury beauty segment a decade back to enter
white spaces. Now, this is one of the fastest businesses for Unilever. The company in its release
note, attributes part of its success to its start-up mentality, which permeates Unilever Prestige.

Exhibit 14: Key brand offerings under Unilever Prestige

Source: Company

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Hindustan Unilever (HUVR IN) India Equity Research | Company Update

Product superiority across portfolio

The company has started evaluating products against 6 drivers of consumer preference and is
taking targeted actions to strengthen all of its brands. As the company is reformulating brands,
it has seen visible improvement in consumer connect and growth.

Exhibit 15: Product superiority is the focus across products

Source: Company

Here are a few examples of how superior product proposition is helping brands do better:

 Vim has relaunched newly formulated dishwashing bars to redefine the dish washing
experience for consumers and has set new benchmarks in the market. Armed with its
differentiated ‘Winning in Many India's’ insights, the relaunch involved a full 6P refresh
including product superiority, attractive packaging, pricing actions, new communication
including digital deployment to land the best dish wash bar in the market. These actions
should improve momentum as the company continues to improve the brand power of Vim

 Ponds is positioned to cement its leadership in Skin Care, with strong growth YoY. With
sharper, more relevant proposition, new desirable packaging, and contemporary visual
treatment, the company is building a platform of innovative products formulated with
breakthrough ingredients in exciting formats that give millions of women their desired skin.
Augmented by these actions the brand continues to gain market share in a highly
competitive category.

Exhibit 16: Horlicks reformulation strengthen brand proposition Exhibit 17: HUL is reaping benefits from Vim liquid

Source: Company Source: Company

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September 6, 2024 |7
Hindustan Unilever (HUVR IN) India Equity Research | Company Update

Hot beverages seeing recovery with better rains YoY

Unlike Q1FY25, where hot beverages segment was impacted from the harsh summer, Q2
demand setting for hot beverages, tea in particular, has been decent in our view. The company
has effected volume increase in mass end under Taaza, which is also been supported by apt
trade schemes. HUL has been able to negate consumer down trading with apt price actions.

Exhibit 18: Tea prices at Tea board

280

250

220

190

(Rs/kg)
160

130

100

70
Nov-18

Nov-19

Nov-20

Nov-21

Nov-22

Nov-23
Aug-18

Feb-19

May-19

Feb-20

May-20

Feb-21

May-21

Aug-21

Feb-22

May-22

Feb-23

May-23

Feb-24

May-24

Aug-24
Aug-19

Aug-20

Aug-22

Aug-23
Source: Company, Emkay Research

Demand setting for Coffee and functional nutrition is likely to remain under pressure in the
near-term given inflationary headwinds. With respect to coffee, there is no respite visible in
the near term from inflation in raw materials, which continues to keep coffee prices elevated.
While the category has seen a strong uptick in consumption post-Covid, the recent inflation
has been a dampener.

Exhibit 19: Wholesale price index for Coffee

200

180

160

140

120

100

80
Oct-18

Jun-19

Oct-19

Jun-20

Oct-20

Jun-21

Oct-21

Jun-22

Oct-22

Jun-23

Oct-23

Jun-24
Dec-18

Dec-19

Dec-20
Feb-21

Dec-21

Dec-22

Apr-23

Dec-23
Feb-19
Apr-19

Feb-20
Apr-20

Apr-21

Feb-22
Apr-22

Feb-23

Feb-24
Apr-24
Aug-18

Aug-19

Aug-20

Aug-21

Aug-22

Aug-23

Aug-24
Source: Wholesale Price Index, Emkay Research

With respect to functional food drinks, we see elevated milk prices as a concern.

Exhibit 20: Milk prices

60
58
56
54
52
(Rs/ltr)

50
48
46
44
42
40
Jun-19

Jun-20

Jun-21

Jun-22

Jun-23

Jun-24
Oct-22
Oct-18

Oct-19

Oct-20

Oct-21

Dec-22

Oct-23
Dec-18

Dec-19

Dec-20

Dec-21

Dec-23
Feb-19
Apr-19

Feb-20
Apr-20

Feb-21
Apr-21

Feb-22
Apr-22

Feb-23
Apr-23

Feb-24
Apr-24
Aug-18

Aug-19

Aug-20

Aug-21

Aug-22

Aug-23

Aug-24

Source: Consumer affairs data, Emkay Research

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Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>.Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research
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September 6, 2024 |8
Hindustan Unilever (HUVR IN) India Equity Research | Company Update

Valuation factoring better execution

Exhibit 21: PE valuation chart (1yr forward consensus)

P/E 5-Y mean +1 S.D. -1 S.D.

70

65

60

55

50
(x)

45

40

35

30
Sep-14

Sep-15

Sep-16

Sep-17

Sep-18

Sep-19

Sep-20

Sep-21

Sep-22

Sep-23

Sep-24
Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Jan-21

Jan-22

Jan-23

Jan-24
May-15

May-16

May-17

May-18

May-19

May-20

May-21

May-22

May-23

May-24
Source: Bloomberg, Emkay Research

Exhibit 22: Emkay vs consensus estimates

Emkay estimates Consensus estimates Emkay estimate vs consensus

(Rs mn)
FY25E FY26E FY27E FY25E FY26E FY27E FY25E FY26E FY27E
Net sales 631,131 691,017 753,239 641,683 699,735 765,662 -2% -1% -2%
Growth 5.6% 9.5% 9.0% 7.4% 9.0% 9.4%
EBITDA 153,485 170,277 188,594 152,324 168,965 188,476 1% 1% 0%
Growth 8.2% 10.9% 10.8% 7.3% 10.9% 11.5%
EBITDA margin 24.3% 24.6% 25.0% 23.7% 24.1% 24.6%
Adj PAT 109,411 122,271 135,959 109,668 122,091 136,844 0% 0% -1%
Growth 9.6% 11.8% 11.2% 9.8% 11.3% 12.1%
EPS (Rs) 46.56 52.03 57.86 46.74 52.07 57.64 0% 0% 0%

Source: Company, Emkay Research

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September 6, 2024 |9
Hindustan Unilever (HUVR IN) India Equity Research | Company Update

Exhibit 23: Key assumptions

FY21 FY22 FY23 FY24E FY25E FY26E FY27E

Income statement
Total income growth 18.6% 11.3% 15.5% 2.2% 5.6% 9.5% 9.0%
Gross margin 52.9% 50.9% 47.3% 51.5% 52.8% 53.3% 53.9%
Royalty 2.6% 2.7% 2.7% 3.2% 3.4% 3.5% 3.5%
Advertisement 10.3% 9.2% 8.2% 10.6% 11.4% 11.9% 11.9%
EBITDA margin 24.6% 24.4% 23.0% 23.5% 24.0% 24.4% 24.7%
Tax rate 25.7% 25.9% 26.0% 27.5% 26.5% 26.5% 26.5%
Adj PAT growth 18.1% 9.6% 11.4% 2.7% 9.6% 11.8% 11.2%
EPS (Rs) 33.89 37.12 41.36 42.49 46.56 52.03 57.86
Balance Sheet
ROE 29% 18% 20% 20% 21% 24% 26%
ROCE 37% 24% 25% 26% 28% 31% 34%
Inventory days (no. of) 27 28 25 23 24 24 23
Receivable days (no. of) 13 14 17 16 17 17 17
Payable days (no. of) 68 63 58 61 59 59 59
Segment revenue growth (%)
Home care 3.0 18.8 28.1 3.2 8.0 10.0 9.0
Personal care 5.6 8.3 12.2 1.5 4.0 10.0 9.0
Food and refreshment 78.6 6.8 5.5 2.8 5.5 8.0 9.0
Segment EBIT margin (%)
Home care 19.9 19.3 18.3 18.4 19.5 20.0 20.5
Personal care 28.5 27.5 25.6 26.2 26.0 26.5 27.0
Food and refreshment 16.6 18.6 17.9 18.6 19.5 20.0 20.5

Source: Company, Emkay Research

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September 6, 2024 |10
Hindustan Unilever (HUVR IN) India Equity Research | Company Update

Hindustan Unilever: Consolidated Financials and Valuations

Profit & Loss Balance Sheet

Y/E Mar (Rs mn) FY23 FY24 FY25E FY26E FY27E Y/E Mar (Rs mn) FY23 FY24 FY25E FY26E FY27E
Revenue 591,440 604,690 638,538 699,165 762,201 Share capital 2,350 2,350 2,350 2,350 2,350
Revenue growth (%) 15.5 2.2 5.6 9.5 9.0 Reserves & Surplus 499,860 507,380 511,321 516,371 521,011
EBITDA 136,320 141,900 153,485 170,277 188,594 Net worth 502,210 509,730 513,671 518,721 523,361
EBITDA growth (%) 9.0 4.1 8.2 10.9 10.8 Minority interests 0 0 0 0 0
Depreciation & Amortization 10,300 10,970 11,970 12,000 12,500 Deferred tax liability (net) 63,250 64,540 64,540 64,540 64,540
EBIT 126,020 130,930 141,515 158,277 176,094 Total debt 0 0 0 0 0
EBIT growth (%) 9.8 3.9 8.1 11.8 11.3 Total liabilities & equity 565,460 574,270 578,211 583,261 587,901
Other operating income 9,900 8,900 7,407 8,148 8,962 Net tangible fixed assets 513,900 523,640 521,670 519,670 517,320

Other income 6,400 9,730 10,967 12,064 13,270 Net intangible assets 150 150 150 150 0
Financial expense 1,010 3,020 3,624 3,986 4,385 Net ROU assets 11,820 12,411 13,032 13,683 0
PBT 131,410 137,640 148,858 166,355 184,979 Capital WIP 10,200 9,150 9,150 9,150 9,150
Extraordinary items 0 0 0 0 0 Goodwill 150 150 150 150 0
Taxes 34,210 37,791 39,447 44,084 49,019 Investments [JV/Associates] 21,360 21,880 22,479 24,317 26,218
Minority interest 0 0 0 0 0 Cash & equivalents 72,350 117,280 121,889 133,269 147,011
Income from JV/Associates 0 0 0 0 0 Current assets (ex-cash) 100,320 98,620 106,174 114,665 121,443
Reported PAT 97,200 99,849 109,411 122,271 135,959 Current Liab. & Prov. 152,820 196,450 203,301 217,959 233,241
PAT growth (%) 11.4 2.7 9.6 11.8 11.2 NWC (ex-cash) (52,500) (97,830) (97,127) (103,294) (111,798)
Adjusted PAT 97,200 99,849 109,411 122,271 135,959 Total assets 565,460 574,270 578,211 583,261 587,901
Diluted EPS (Rs) 41.4 42.5 46.6 52.0 57.9 Net debt (72,350) (117,280) (121,889) (133,269) (147,011)
Diluted EPS growth (%) 11.4 2.7 9.6 11.8 11.2 Capital employed 565,460 574,270 578,211 583,261 587,901
DPS (Rs) 39.0 42.0 45.0 50.0 56.0 Invested capital 461,400 425,810 424,543 416,376 405,522
Dividend payout (%) 94.3 98.8 96.7 96.1 96.8 BVPS (Rs) 213.7 216.9 218.6 220.7 222.7
EBITDA margin (%) 23.0 23.5 24.0 24.4 24.7 Net Debt/Equity (x) (0.1) (0.2) (0.2) (0.3) (0.3)
EBIT margin (%) 21.3 21.7 22.2 22.6 23.1 Net Debt/EBITDA (x) (0.5) (0.8) (0.8) (0.8) (0.8)
Effective tax rate (%) 26.0 27.5 26.5 26.5 26.5 Interest coverage (x) 0.0 0.0 0.0 0.0 0.0
NOPLAT (pre-IndAS) 93,213 94,982 104,014 116,334 129,429 RoCE (%) 23.8 24.7 26.5 29.3 32.3
Shares outstanding (mn) 2,350.0 2,350.0 2,350.0 2,350.0 2,350.0 Source: Company, Emkay Research

Source: Company, Emkay Research

Cash flows Valuations and key Ratios

Y/E Mar (Rs mn) FY23 FY24 FY25E FY26E FY27E Y/E Mar FY23 FY24 FY25E FY26E FY27E

PBT 131,410 137,640 148,858 166,355 184,979 P/E (x) 68.7 66.8 61.0 54.6 49.1

Others (non-cash items) 0 0 0 0 0 P/CE(x) 60.7 58.9 53.8 48.6 44.0

Taxes paid (30,680) (2,950) (39,447) (44,084) (49,019) P/B (x) 13.3 13.1 13.0 12.9 12.8

Change in NWC (8,630) 11,360 (1,302) 4,329 6,603 EV/Sales (x) 11.4 11.0 10.4 9.5 8.7

Operating cash flow 96,260 148,840 112,736 130,522 146,177 EV/EBITDA (x) 48.4 46.2 42.7 38.4 34.6

Capital expenditure (9,730) (12,980) (10,000) (10,000) (10,000) EV/EBIT(x) 51.2 49.0 45.3 40.4 36.2

Acquisition of business 0 0 0 0 0 EV/IC (x) 14.0 15.1 15.1 15.4 15.7

Interest & dividend income 3,910 5,930 10,967 12,064 13,270 FCFF yield (%) 1.3 2.1 1.6 1.9 2.1

Investing cash flow (10,620) (49,710) (4,033) (2,936) (6,730) FCFE yield (%) 1.4 2.1 1.7 2.0 2.2

Equity raised/(repaid) 0 0 280 280 280 Dividend yield (%) 1.4 1.5 1.6 1.8 2.0

Debt raised/(repaid) 0 0 0 0 0 DuPont-RoE split

Payment of lease liabilities 0 0 0 0 0 Net profit margin (%) 16.4 16.5 17.1 17.5 17.8
Interest paid 0 (4,920) (3,624) (3,986) (4,385) Total asset turnover (x) 1.1 1.1 1.1 1.2 1.3
Dividend paid (incl tax) (84,590) (93,980) (105,750) (117,500) (131,600) Assets/Equity (x) 1.1 1.1 1.1 1.1 1.1
Others (5,070) 0 0 0 0 RoE (%) 19.6 19.7 21.4 23.7 26.1
Financing cash flow (89,660) (98,900) (109,094) (121,206) (135,705) DuPont-RoIC
Net chg in Cash (4,020) 230 (391) 6,380 3,742 NOPLAT margin (%) 15.8 15.7 16.3 16.6 17.0
OCF 96,260 148,840 112,736 130,522 146,177 IC turnover (x) 1.3 1.4 1.5 1.7 1.9
Adj. OCF (w/o NWC chg.) 104,890 157,470 114,038 126,193 139,574 RoIC (%) 20.5 21.4 24.5 27.7 31.5
FCFF 86,530 135,860 102,736 120,522 136,177 Operating metrics
FCFE 89,430 138,770 110,079 128,600 145,062 Core NWC days (36.9) (38.9) (39.2) (37.3) (37.7)
OCF/EBITDA (%) 70.6 104.9 73.5 76.7 77.5 Total NWC days (32.4) (59.1) (55.5) (53.9) (53.5)
FCFE/PAT (%) 92.0 139.0 100.6 105.2 106.7 Fixed asset turnover 1.1 1.1 1.1 1.2 1.3
FCFF/NOPLAT (%) 92.8 143.0 98.8 103.6 105.2 Opex-to-revenue (%) 24.3 28.0 28.8 29.0 29.1

Source: Company, Emkay Research Source: Company, Emkay Research

This report is intended for team.emkay@whitemarquesolutions.com use and downloaded at 09/09/2024 12:24 PM
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>.Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research
analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
September 6, 2024 |11
Hindustan Unilever (HUVR IN) India Equity Research | Company Update

RECOMMENDATION HISTORY - TREND

RECOMMENDATION HISTORY - DETAILS

Closing BUY Hold Sell Reduce

Date TP (INR) Rating Analyst
Price (INR) Add Price Target Price
3100
24-Jul-24 2,717 3,100 Buy Nitin Gupta
2868
04-Jul-24 2,496 2,900 Buy Nitin Gupta
26-Jun-24 2,446 2,900 Buy Nitin Gupta 2636

04-Jun-24 2,496 2,900 Buy Nitin Gupta 2404

31-May-24 2,329 2,575 Add Nitin Gupta
2172
13-May-24 2,361 2,500 Add Nitin Gupta
1940

7-Sep-22
8-Sep-21

6-Sep-23

4-Sep-24
9-Mar-22

8-Mar-23

6-Mar-24
08-May-24 2,341 2,500 Add Nitin Gupta
25-Apr-24 2,231 2,500 Add Nitin Gupta
15-Apr-24 2,194 2,500 Add Nitin Gupta
07-Apr-24 2,267 2,500 Add Nitin Gupta Source: Company, Bloomberg, Emkay Research

14-Mar-24 2,335 2,700 Add Nitin Gupta

23-Jan-24 2,376 2,700 Add Nitin Gupta
20-Jan-24 2,469 2,700 Add Nitin Gupta
07-Jan-24 2,620 2,800 Add Nitin Gupta
12-Dec-23 2,503 2,800 Add Nitin Gupta
30-Nov-23 2,546 2,800 Add Nitin Gupta
24-Nov-23 2,515 2,800 Hold Nitin Gupta
20-Oct-23 2,495 2,800 Hold Nitin Gupta
03-Oct-23 2,469 2,800 Hold Nitin Gupta
28-Aug-23 2,556 2,850 Hold Nitin Gupta
15-Aug-23 2,533 2,850 Hold Nitin Gupta
20-Jul-23 2,703 2,850 Hold Nitin Gupta
25-Jun-23 2,642 2,850 Hold Nitin Gupta

Source: Company, Emkay Research

This report is intended for team.emkay@whitemarquesolutions.com use and downloaded at 09/09/2024 12:24 PM
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>.Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research
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Hindustan Unilever (HUVR IN) India Equity Research | Company Update

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Hindustan Unilever (HUVR IN) India Equity Research | Company Update

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Hindustan Unilever (HUVR IN) India Equity Research | Company Update

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