Hindustan Unilever (BOM:500696)

QUOTE AND NEWS
Reuters  Sep 29  Comment 
Reuters Market Eye - Hindustan Unilever Ltd (HUL) falls 2 percent.
The Economic Times  Sep 24  Comment 
Punit Misra, vice president (customer development) for global route to market and traditional trade at Unilever, will replace Tiwary as HUL executive director and vice president.
The Times of India  Sep 18  Comment 
In what clearly highlights the hectic pace at which the Indian consumer is evolving and the urgency with which marketers are trying to decipher their needs and cater to them to stay ahead of the curve, leading FMCG company, Hindustan Unilever...
The Hindu Business Line  Sep 11  Comment 
IDFC extended yesterday’s firm sentiment into the session on Thursday. At 11.20 am it was quoting at ₹149.50, up 3.17 per cent on yesterday’s close at ₹144.90. Hindustan Unilever gained 1...
The Economic Times  Sep 4  Comment 
"Hindustan Unilever is a 'BUY' call with a target of Rs 765 and a stop loss of Rs 732."
The Economic Times  Aug 27  Comment 
"Hindustan Unilever is a 'BUY' call with a target of Rs 750 and a stop loss of Rs 720."
The Economic Times  Aug 21  Comment 
Five Indian companies, including Hindustan Unilever and Tata Consultancy Services, are among Forbes' list of the world's 100 most innovative companies.
The Economic Times  Aug 13  Comment 
"Something like the FMCG space looks exceptionally good. Stocks like a Dabur, Hindustan Unilever, ITC, etc., are likely to outperform."
The Economic Times  Aug 13  Comment 
"Hindustan Unilever is a 'Buy' call with a target of Rs 750 and a stop loss of Rs 707."
The Times of India  Aug 12  Comment 
Replacing Bakshi, are two young "listers" (term used for super performers at HUL) Samir Singh and Priya Nair who have been appointed EDs of the respective portfolios, personal care and home care.




 

Hindustan Unilever Ltd. (Bombay Stock Exchange: 500696) makes fast-moving consumer goods (FMCG) such as detergents, toiletries, and food staples. The company has a distribution channel of 6.3 million outlets and 30 major Indian brands. HUL recorded 20.02 year over year (yoy) growth in revenue at Rs 16660.38 crores during the year ended Dec'08. Its Soaps and Detergents business was its largest contributor to revenues with 46% of total revenues where as Personal Care products contributed the most (46%) towards EBIT (Earnings before Income Tax).

Increase in per capita income in urban, as well as rural areas, of India has a positive effect on demand of consumer goods along with a shift in demand towards high end lifestyle products. Long a provider of low cost consumer goods, HUL has recently launched products in its high end segments.

Company Overview

HUL, the largest FMCG Company in India by revenues was formed by merging three subsidiaries of Unilever in 1956. At present, Unilever Plc holds a 51.6% stake in the company. HUL’s portfolio of products covers a wide spectrum including soaps, detergents, skin creams, shampoos, toothpastes, tea, coffee and branded flour.[1] HUL's brands, spread across 20 distinct consumer categories. It owns 35 major Indian brands. HUL has consistently had the most number of brands in the Top 10 list for the most trusted brands in India from 2003 to 2009. Surf Excel, Pepsodent and Ponds in Home and Personal Care segment and Lipton, Kissan and Brooke Bond in Foods and Beverages Segment are some of its top brands. It launched Ponds Age Miracle,Vaseline range of products in skin care category and Axe-Dark Temptation in personal care segment as part of their expansion into higher end products.

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Trends and Forces

Increasing raw material prices drives HUL to raise its prices

Raw materials constitute a big chunk (around 60%) of input cost for FMCG sector companies. For HUL- Palm Oil and Chemicals contribute 59% of total raw material cost. Due to inflated input cost in Soap and Detergents division EBITDA(earnings before income tax and depriciation) margins have suffered.

The first steep increase in the prices of key raw materials such as palm oil, LAB - Linear Alkyl Benzene, caustic soda, soda ash, raw tea, coffee and crude oil derivatives has led the company to implement price hikes in competitive segments like toothpaste, soaps, detergents and shampoo.

But recently softening Inventories - Raw Materials prices in the last 2-3 months have provided respite to FMCG sector companies. Raw material and packaging materials have fallen sharply from their highs recorded in Sep'08. The benefit of fall in raw material prices will be accured later when high cost inventory will be replaced by a cheaper inventory.

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Per Capita consumption of personal care products in India is one of the lowest among developing economies of the world.

India has one of the lowest levels in per capita consumption of consumer goods among developing economies of the world. It has per capita consumption levels of 1.4,0.3,0.2 and 0.3 US$ in detergents, shampoo, ice-creams and skin care segments respectively which are lower than that of China, Brazil and Indonesia. Consumption levels in the U.S., a developed country, are 16.6, 6.7, 49.4 and 36.6 in categories mentioned before. Low consumption coupled with increase in per capita income poses as a growth opportunity for consumer products companies.

Highly Competitive FMCG Sector limits profit margins of HUL.

In a volume driven and competitively intense environment with competition also from local players FMCG players are aggressively promoting their brands to gain product awareness, customer base, and their shares of the customers’ wallets. To facilitate launch new products and relaunch of existing products companies are increasing their research and development expenditure. These factors eat up the profitability margins of the companies. Pricing scenario in current time is in favor of companies but in past due to pricing war with P&G in Soaps and Detergents.

Competition

The Indian FMCG sector is the fourth largest sector in the economy with a total market size of $18 billion. As the name suggests FMCG products are frequently used and bought by the customers so there are large number of players supplying same products. HUL is the only company in Indian consumer goods market that has products in more segments than any other company of the same sector.HUL is the largest FMCG company in terms of revenues.

Procter and Gamble (P&G) India : HUL faces a fierce competition from P&G India in its key segments i.e. Detergents and Personal Care. It operates in India thorugh three subsidiaries: Procter and Gamble Home Products (100% subsidiary of the company), Procter and Gamble Hygiene and Health care Ltd. (PGHH) and Gillette India Ltd. It has in its portfolio some of P&G's Billion dollar brands such as Vicks & Whisper in health care and Ariel and Tide in detergents segments.[2]

Godrej Consumer Products Ltd. (GCPL): It has two segments: Soap (64% of revenues) and Personal Care.GCPL is second largest soap player in India after HUL with a market share of 9.2%. Personal Care includes hair care products, shaving cream and other toiletries.

Dabur India Limited - Dabur India Limited is an India-based fast moving consumer goods company which deals in healthcare, personal care and food products.

Colgate-Palmolive (India) Limited : It manufactures a range of products marketed under the Colgate which includes oral care products and Palmolive (skin care and hair care products) brand names.

Marico Limited:Marico has a portfolio on high margin "Beauty and Wellness" platform which includes hair oils, soaps, edible oils, skin care etc.

References

  1. Company Website
  2. P&G India website
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