Hindustan Unilever – One step forward

Hindustan Unilever Limited (HUL) is an Indian consumer goods company headquartered in Mumbai. It is a subsidiary of the British company Unilever. Its products include foods, beverages, cleaning agents, personal care products, water purifiers and other fast-moving consumer goods (FMCGs).

HUL was established in 1931 as Hindustan Vanaspati Manufacturing Co. Following a merger of constituent groups in 1956, it was renamed Hindustan Lever Limited. The company was renamed again in June 2007 as Hindustan Unilever Limited.

Hindustan Unilever is in the FMCG business comprising primarily of Home Care, Beauty & Personal Care and Foods & Refreshment segments. The company has manufacturing facilities across the country and sells primarily in India.

As of 2019, Hindustan Unilever’s portfolio had 50+ product brands in 14 categories. The company has 21,000 employees.

Quarterly Growth Walkthrough

Hindustan Unilever reported its December quarter (Q3FY23) consolidated results with an increase in the net profit by 7.9 percent to Rs 2,481 crore. The company had reported a profit of Rs 2,300 crore in the corresponding quarter of the previous year.

The company’s consolidated revenue from operations was noted at Rs 15,597 crore, which is up by 16 percent as compared to Rs 13,439 crore which was registered in the corresponding quarter of the previous year.

EBITDA margin was reported at 23.6 percent which has enhanced by 30 basis points as compared to previous quarters and it has diminished 180 bps YoY.

Voice of the Company Head & the Board of Directors

Sanjiv Mehta, the CEO and Managing Director said in a statement, “Sustaining our strong momentum, we had yet another quarter of solid all-round performance delivering double-digit revenue and earnings growth. Our consistent performance is reflective of our strategic clarity, strength of our brands, excellence in execution, and dynamic financial management. I am excited about our foray into the fast-evolving ‘Health and Wellbeing’ category through our strategic partnerships with OZiva and Wellbeing Nutrition”.

The Board of Directors have approved the proposal to begin a fresh arrangement with Unilever group entities for the provision of technology and trademark licenses to HUL. With this new agreement, the royalty and central services fees will increase from 2.65 percent in FY22 to 3.45 percent of turnover.

During the quarter, HUL said it has observed moderation into inflation, although it persists to be high on a year-on-year basis. The company manages its business dynamically by driving savings rigorously amongst all lines of profit and loss, ensuring the right price-value equation and investing competitively behind their brands.

“Looking forward, we are cautiously optimistic in the near term and believe that the worst of inflation is behind us,” said Mehta. “This should aid in a gradual recovery of consumer demand. We remain focused on managing our business with agility and continue growing our consumer franchise whilst maintaining margins in a healthy range.”

Segment wise performance

Home Care has given a 32 percent revenue growth and fruitful volume growth. Fabric Wash and Household Care have grown in high numbers with all parts of the portfolio putting out a good performance.

Beauty & Personal Care has grown by 10 percent. Skin Cleansing has given a rigid double-digit growth with volumes growing in the mid-single digits. Hair Care has grown high single-digit supported by strong performance in Clinic Plus.

Foods & Refreshment segment has given a 7 percent growth through robust performance in Foods, Coffee and Ice-cream.

Technical Analysis

Hindustan-Unilever Weekly Candlestick Chart on Sharekhan’s TradeTiger

HUL share price faces heavy resistance as it tries to approach the levels around its lifetime high of Rs 2700. Operators have a high presence managing the price under Rs 2700. The stock had taken heavy support at the 38.2% retracement level at Rs 2066 where the price had went below the 200-day moving average. We can see the price moving in the up-trending channel marked by the blue lines. Considering the stable quarter and positive remarks by the board of directors, we can expect HUL to make a break over the level of Rs 2800 soon. However, the momentum seems to be weak and the breakout may not occur soon. MFI is at 59 points which indicates the stock is not yet oversold for fresh investments.

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