X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
HLL: Topline blues continue… - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 25, 2002

    HLL: Topline blues continue…

    FMCG major, Hindustan Lever, has once again reported disappointing topline numbers. Sales in 3QFY03 have fallen by over 7%. But the company's operating margins continue to expand (up 360 basis points), indicating improvement in quality of earnings. The company has reported a marginal 4% growth in net profits. But this is as a result of extraordinary income effect (Rs 215 m) reported in 3QFY02. Excluding extraordinary items effect in both years, the bottomline has actually improved by over 11% YoY.

    (Rs m) 3QFY02 3QFY03 Change 9mFY02 9mFY03 Change
    Net Sales 25,514 23,675 -7.2% 79,709 73,204 -8.2%
    Other Income 1,134 1,062 -6.3% 3,068 2,838 -7.5%
    Total expenditure 21,446 19,054 -11.2% 68,334 59,887 -12.4%
    Operating Profit (EBDIT) 4,068 4,621 13.6% 11,375 13,317 17.1%
    Operating Profit Margin (%) 15.9% 19.5%   14.3% 18.2%  
    Interest 25 18 -30.7% 58 78 34.3%
    Depreciation 393 313 -20.2% 1,053 1,013 -3.7%
    Profit before Tax & extraordinary income 4,784 5,351 11.9% 13,332 15,064 13.0%
    Extraordinary income 215 -68 -131.8% 1,640 1,148 -30.0%
    Tax 1,007 1,150 14.2% 2,922 3,319 13.6%
    Profit after Tax/(Loss) 3,992 4,133 3.5% 12,049 12,892 7.0%
    Effective tax rate (%) 21.1% 21.5%   21.9% 22.0%  
    Net profit margin (%) 15.6% 17.5%   15.1% 17.6%  
    No. of Shares (eoy) (m) 2200.6 2201.2   2200.6 2201.2  
    Earnings per share* 7.3 7.5   7.3 7.8  
    *(annualised)            
    Current P/e ratio (incl. Extraordinary income)   21.4     20.6  

    HLL's domestic HPC (household and personal care) business has reported a healthy 5% growth in topline, aided by power brands which grew by 6.8% YoY. In this business, Lifebuoy, Lux, Wheel, Fair & Lovely, Ponds, Pears and Lakme, all recorded double digit growth. Exports continued to shrink due to planned dicontinuation of traded exports (down 33% YoY).

    Sales break-up
    (Rs m) 2QFY02 2QFY03 % change 1HFY02 1HFY03 % change
    Domestic FMCG - HPC 14,863 15,590 4.9% 46,130 47,458 2.9%
    Domestic FMCG - Foods (incl. ice-creams) 5,794 4,885 -15.7% 17,287 15,555 -10.0%
    Domestic FMCG - Total 20,657 20,476 -0.9% 63,417 63,014 -0.6%
    b) Exports 4,200 2,801 -33.3% 13,615 8,875 -34.8%
    c) Others 657 398 -39.5% 2,677 1,315 -50.9%
    Total 25,514 23,675 -7.2% 79,709 73,204 -8.2%

    HLL's soaps and detergents business grew by 2.8%, led by a strong personal wash growth of 11.1%. Lifebuoy and Lux performed exceptionally well, and grew by 35% and 11% respectively. Personal products grew strongly by 9.5% led by a 48.6% growth in the skin category. Fair & Lovely, Ponds and Lakme, all recorded an excellent performance growing by 43%, 11% and 16% respectively. The declining trend in Shampoo sales was reversed by a successful relaunch of Clinic. In oral care, market shares were steady although sales declined during the quarter.

    Segment revenue snapshot
    (Rs m) 3QFY02 3QFY03 % change 9mFY02 9mFY03 % change
    - Soaps and Detergents 10,315 10,622 3.0% 31,515 32,526 3.2%
    - Personal Products 4,590 5,083 10.7% 14,729 15,241 3.5%
    - Beverages 3,362 2,703 -19.6% 10,461 9,138 -12.6%
    - Foods (includes Oils and Fats, Culinary and Branded Staples ) 2,028 1,842 -9.1% 5,501 5,216 -5.2%
    - Ice Creams 330 232 -29.6% 1,243 900 -27.6%
    - Exports 4,200 2,801 -33.3% 13,615 8,875 -34.8%
    - Others (includes Chemicals, Agri, Plantations etc) 1,492 863 -42.2% 4,898 2,615 -46.6%
    Total Segment Revenue 26,316 24,147 -8.2% 81,961 74,511 -9.1%
    Less : Inter segment revenue 739 283 -61.7% 2,067 714 -65.4%
    Net Segment Revenue 25,577 23,864 -6.7% 79,895 73,797 -7.6%

    The company continues to stress on improving the profitability in each of the categories it operates in. Consequently, HLL has improved its PBIT margins across most of the product segments (see table). Except for foods and the others category, the company has improved its PBIT margins in all categories. Infact, ice-creams have seen over 900 basis points PBIT margin expansion in the nine months ended September 2002 on a YoY basis. In foods, though culinary did well, the overall performance was overshadowed by the competitive pressure on its staples business. The branded staples category has seen new players like Shakti Bhog, ITC, Nature Fresh and Healthy World entering the fray, in competition with existing players like Pillsbury and Annapurna.

    The big picture…
      % contribution
    to 9mFY03 sales
    Turnover
    growth
    PBIT
    growth
    PBIT
    margin (%)
    PBIT
    margin growth
    (basis points)
    Soaps and Detergents 43.7% 3.2% 18.6% 24.6% 319
    Personal Products 20.5% 3.5% 15.2% 32.9% 334
    Beverages 12.3% -12.6% 10.9% 19.0% 403
    Foods (includes Oils and Fats, Culinary and
    Branded Staples )
    7.0% -5.2% - -4.3% -309
    Ice Creams 1.2% -27.6% - -4.9% 941
    Exports 11.9% -34.8% 25.3% 6.5% 311
    Others (includes Chemicals, Agri,
    Plantations etc)
    3.5% -46.6% - -0.8% -816
    *taken 9 month figures as base          

    On a like to like basis, the company has reported over 5% dip in topline during the September quarter and PAT has grown by 11% during this period YoY. PBIT is up a healthy 16%.

    Results on like to like basis
    (Rs m) 3QFY02 3QFY03 Change 9mFY02 9mFY03 Change
    Net sales 25,025 23,675 -5.4% 78,172 73,137 -6.4%
    PBIT 3,904 4,539 16.3% 10,630 12,994 22.2%
    PAT 3,786 4,201 11.0% 10,061 11,741 16.7%
    Net margin (%) 15.1% 17.7%   12.9% 16.1%  

    The stock has tanked to new lows due to continued pressure on topline and bottomline growth, notwithstanding the power brands improved performance. At the current price of Rs 161 the stock trades at 20.6x annualised 9mFY03 earnings, a valuation when compared with other peers is still on the higher side. However, the benefits of HLL's restructuring will become clear only next year onwards, when a real time YoY comparision will be possible. All said and done, we continue to believe that over the long term, HLL will continue to dominate the FMCG scene in India. Post the current restructuring, HLL is likely to come out trimmer and more profitable.

     

     

    Equitymaster requests your view! Post a comment on "HLL: Topline blues continue…". Click here!

      
     

    More Views on News

    Marico: Earnings Hit by Lower Volumes and Firming Input Prices (Quarterly Results Update - Detailed)

    Aug 9, 2017

    While GST implementation brought down volumes and profitability in the short run, Marico remains optimistic in the long run.

    HUL: A Slow End to a Dull Year... (Quarterly Results Update - Detailed)

    May 9, 2016 | Updated on May 11, 2016

    HUL announced its results for the quarter and year ended March 2016. While revenues rose by 4% YoY, net profits increased by 7% YoY.

    Hindustan Unilever: Deflationary Pressures Curb Growth (Quarterly Results Update - Detailed)

    Jan 21, 2016

    HUL announced its results for the quarter ended December 2015. While revenues were up by 3% YoY, profits came in lower by 22% YoY.

    Hindustan Unilever: Fails to meet expectations (Quarterly Results Update - Detailed)

    Oct 16, 2015

    HUL announced its results for the quarter ended September 2015. While revenues were up by 4% YoY, profits came in lower by 3% YoY.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    HIND. UNILEVER SHARE PRICE


    Aug 23, 2017 03:36 PM

    TRACK HIND. UNILEVER

    • Track your investment in HIND. UNILEVER with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    MORE ON HIND. UNILEVER

    HIND. UNILEVER - GODREJ CONSUMER COMPARISON

    Compare Company With Charts

    COMPARE HIND. UNILEVER WITH

    MARKET STATS