The fortunes of Unilever and Hindustan Unilever Limited (HUL) show a dissimilarity. Unilever’s CEO will be departing from the company by the end of 2023 which forecasts a period of uncertainty for the FMCG giant, but its Indian subsidiary HUL has proven its strengths by conquering over consumers and investors.
This article emphasizes on the differences between the foreign company Unilever and its Indian subsidiary Hindustan Unilever Limited.
Walkthrough
Unilever has faced a poor year which is one of the world’s top consumer goods companies. The bidding for GlaxoSmithKline’s consumer unit has not been successful which led to the announcement that the CEO Alan Jope will leave the company by the end of 2023. This prolonged departure with no successor is a clear notation that the $62 billion corporation is not well. The company tried for a $3.4 billion share buyback which was a failure to appease shareholders because the company underperformed its rivals Nestle and P&G.
Unilever has a 62 percent stake in its Indian subsidiary Hindustan Unilever Limited (HUL) has outstanding performance and outperforms its rivals in the Indian market. Despite the mess of Coronavirus with the lockdowns, HUL’s turnover has grown by 11 percent. Despite the tough environment the company made its highest market share gains in a decade.
The Indian unit HUL aims for growth that is consistent, competitive, profitable and responsible.
HUL’s EBITDA margin over the previous 5 years has remained in the range of 20-23 percent whereas the revenue of the past 3 years has risen at a CAGR of 9.8 percent and net profit at 13.6 percent. Contrastingly, Unilever posted a revenue CAGR of 0.9 percent over the same period.
The e-commerce channel which is the fastest growing platform for FMCG has accounted for 13 percent of Unilever’s total group sales. For HUL, the equivalent figure might be lesser due its massive rural market, however some categories such as cosmetics, the figures are double.
HUL is a precious jewel in the crown with the stock price up by 120 percent in the last 5 years. The company has consistently given out generous dividends and its market cap is nearly at 70 percent of Unilever’s overall market cap of $115 billion, but it contributes fore a mere 10 percent of sales.
HUL remains vulnerable as it faces harsh competition and threats from powerful competitors like ITC and Adani Wilmar, the company is focused on mega marketing of Liril, Lifebuoy and Surf.
Technical Analysis
Let us look at the technical chart of HUL –
The stock is generally bullish as it usually stays above the 100-day moving average. The stock is the leader of FMCG sector; hence accumulation of this stock is a good idea for low-risk growth. However, the stock will not be able to give you exponential returns as HUL is already a large cap stock.
A good time to acquire units of this stock would be when the stock price is near the 100-day moving average. The moving average will give you a good timing to buy the stock.
Currently, the stock is in its distribution zone, and it struggles to rise to its lifetime high of 2589. The stock might soon create a double top pattern and it would be a very good trading opportunity to initiate a short trade. MFI on weekly chart is 69 which indicates the stock is overbought and it would be a good time to book part profits if an investor is holding this stock.
HUL has been posting excellent quarterly earnings with steady growth in each quarter. We shall wait for the quarterly earnings results for the second quarter of this financial year and hope for higher growth and expect better returns from this giant and leader of FMCG sector.
Disclaimer: We do not endorse or encourage you to take trades or investment decisions based upon our posts/research, all of your trading and investment activities are your own and should be taken through consultation with reputed financial advisors. The analysis posted on this website has been created by involving multiple mediums which are present over the Internet.