Some companies outperform the market sometimes. What however makes the difference is beating the market, especially when the overall sentiment is bearish. Hindustan Lever (HLL) is one such company, which has outperformed the market in the past three months.
The company is effecting a stock split in the ratio of 10:1 effective 18th July. The move is aimed at increasing the liquidity in the stock. Another advantage of the split would be to make the stock accessible to retail investors who are presently unable to invest in it due to its high cost.
As can be seen from the table during the period April 2000 till date while BSE Sensex declined by 6.6%, HLLís scrip witnessed exactly the reverse trend. Also since past one year, the stock price jumped up by 19.4% compared to an increase of 13.6% in BSE Sensex. So if a person has invested only in HLL rather than investing in BSE Sensex stocks he would have earned an additional 6%.
Price as on
HLL is one of the best wealth creators of investors. Although the topline growth of the company is slowing down, the company has been able to double it net profits every four years. This has been made possible by inorganic growth and increasing efficiencies despite the fact that increasing competition has put pressure on realizations. In future however the company would have to look at generating inorganic growth to continue on its high growth curve. HLL with its cash profits of more than Rs 11 bn is in an ideal position to acquire brands and companies to fuel its future growth.
Among the FMCG companies, HLL has the highest ROCE and RONW, which is a remarkable achievement given its large size.
Hindustan Lever forms the core of many portfolios. The reasons are apparent. While the interest in technology stocks had hurt valuations in the recent past, HLL has bounced back with a familiar poise. To the owners of the stock it is no coincidence. For those aspiring to build sound portfolios this is but just another instance of the stockís strong fundamentals.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407