HLL: Bogged down by short term concerns - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

HLL: Bogged down by short term concerns

Apr 9, 2002

FMCG major, Hindustan Lever (HLL), is slated to declare its first quarter results on April 15. However, the excitement that was built up post its heartening turnover growth in 4QFY02, has been dented. The management has already warned of a sluggish topline in the March quarter. Earlier, HLL's parent Unilever had indicated that their emerging markets business has been relatively weak in 1QFY03. Within that, the Indian business (read HLL) has witnessed a decline in underlying volume sales in the first two months of the current quarter.

The key reason for the sluggish topline expectation is a one time shortening of inventory in the distribution pipeline, in an effort to rationalise the supply chain. The management has indicated that this process is now almost complete and the one-off effect will be felt only in the March quarter. Last year this system also called RS NET was implemented in the soaps and detergents business, that is now extended across all categories. This extension will improve HLL's working capital management further and allow higher margins.

Market expectations for the topline growth in 1QFY03 range between 1.5%-3% and between 12-15% for bottomline growth. Our full year (FY03) estimates stand at 5% topline growth and around 9% bottomline growth (excluding any extraordinary income that may arise later). This conservative 9% growth in bottomline has come despite estimating an improved operating margin from 15.6% in FY02 to 17% in FY03E.

The stock has declined by nearly 15% to Rs 225 levels currently. Based on our estimated EPS (excluding extraordinary income or expenses) of Rs 8.1 in FY03, the stock trades at 28x FY03E earnings. Though any improvement in consumer sentiment may improve topline and bottomline growth going forward, as of now there seem no signs of it. That said, in the longer term, the management's efforts in rationalising its businesses, products and brands are likely to keep HLL at the forefront of the FMCG spectrum. The company will be the foremost beneficiary of a turnaround in rural demand.

Equitymaster requests your view! Post a comment on "HLL: Bogged down by short term concerns". Click here!


More Views on News

These FMCG Stocks Underperformed Sensex in the Past One Year. Can They Reverse Course? (Views On News)

May 24, 2021

Despite growth in volumes, top FMCG stocks underperform BSE Sensex. How long will this underperformance last?

HUL Q4 Results Review: Net Profit Rises 41%; Double-Digit Growth Across All Segments (Views On News)

Apr 30, 2021

Should investors look closely at the stock of HUL post its March quarter performance?

HUL Announces Quarterly Results (3QFY21); Net Profit Up 18.9% (Quarterly Result Update)

Jan 28, 2021 | Updated on Jan 28, 2021

For the quarter ended December 2020, HUL has posted a net profit of Rs 19 bn (up 18.9% YoY). Sales on the other hand came in at Rs 119 bn (up 20.9% YoY). Read on for a complete analysis of HUL's quarterly results.

Key Points to Know Before Applying to Dodla Dairy's Public Issue (Views On News)

Jun 14, 2021

What you should know before applying to Dodla Dairy's IPO.

Bata India Rises 6% Despite Fall in Net Profit (Views On News)

Jun 10, 2021

Here's why shares of the company rose even as profits declined 23.3%.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Jun 16, 2021 (Close)