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: The key to success? - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Dec 4, 2000

    HLL: The key to success?

    The FMCG giant HLL has shown excellent performance over the years. HLL within the Unilever fold has been recognised as one of the best companies and is known for its management talent. The company with more than 115 brands enjoys a market leadership in soaps, detergents, color cosmetics, ice creams and staple foods.

    HLL has consistently improved its financials year over year. During the past four years HLL’s profits grew at a compounded annual growth rate (CAGR) of 30%, which is faster than the growth in the sales (CAGR 11%). However, in recent quarters HLL has witnessed a slowdown in topline growth due to a consumer down trading.

    Financial Snapshot
    Year End December 9 Months 4 years
    (Rs m) 1997 1998 1999 2000 CAGR
    Net Sales 58,050 71,380 76,453 79,560 11.1%
    Other income 1,118 1,429 2,044 2,596 32.4%
    Total Income 59,168 72,809 78,498 82,156 11.6%
    Operating Profit 6,599 9,178 10,756 12,516 23.8%
    Interest 231 245 174 87 -27.8%
    Depreciation 419 804 1,016 964 32.1%
    Profit Before Tax 5,950 8,128 9,566 11,465 24.4%
    Tax 1,900 2,238 2,318 2,650 11.7%
    Net Profit 4,050 5,891 7,248 8,815 29.6%
    No. of shares (m) 2,196 2,196 2,196 2,201  

    Key Ratios
    Particulars 9mths 97 9mths 98 9mths 99 9mths 00
    Operating profit margins 9.4% 10.9% 11.4% 12.5%
    Net profit margins 7.0% 8.3% 9.5% 11.1%
    Tax / PBT 31.9% 27.5% 24.2% 23.1%
    Cash EPS (Rs) * 2.75 3.98 5.01 5.91
    EPS (Rs) * 2.50 3.49 4.39 5.33
    * annualised

    The operating margins of the company improved remarkably in the past four years because of material cost reductions and overall supply chain savings. Further tax savings on accounts of exports contributed in pushing the bottomline growth. HLL's strong export growth was led by home & personal care, beverages and marine products business. The FMCG sector in India is witnessing intense competition from unorganised players. Although the company is well geared and is taking steps to consolidate its market share in various segments, margins could come under strain in the future.

    HLL has identified low unit price packs as its thrust area with a view to increase penetration and to improve topline growth. This has helped it to boost volumes in rural areas. The company derives more than 50% of its revenues from rural areas where demand for its products is growing five times faster than in urban markets. However, lower agriculture growth negatively affects the consumption pattern of the rural India. This is expected to hit its turnover growth in the next few years.

    The company’s beverages business contributes around 13% of sales. The segment is growing at a faster rate (14%) compared to its home and personal care business (5%). To boost its tea business, HLL has identified ‘out of home’ as an important channel to drive the growth. During the year the company has increased number of vending machines for its hot beverages and is planning to launch tea in a tablet form. However, the company’s revenues, especially in commodity businesses like tea and coffee, are subject to international price cycles. This adds uncertainty to revenues and profits from this division.

    At the current market price of Rs 195 HLL is trading at a P/E multiple of 34 times its December 2001 projected earnings, with a market cap to sales ratio of 4 times. Historically, the company has traded in the P/E range of 45-50 times. We have projected a profit growth of 19% on the sales revenues in the range of Rs 114 bn (growth of 5%) for FY01. The future premium valuations of the company depend on its ability to maintain its performance, which again is related to economic growth rate. However, the initiatives taken by the company to frequently launch and re-launch new products, continuous cost reduction and growth through acquisitions could lead to better performance in the next few years.

    Comparative past valuations
    Particulars FY98 FY99 FY00 FY01E
    P/E (x) 50 43 46 34
    Market Cap / Sales (x) 3 3 4 4
    Earnings growth 40.6% 43.8% 32.8% 19.1%
    PEG Ratio 1.2 1.0 1.4 1.8



    Equitymaster requests your view! Post a comment on "HLL: The key to success?". Click here!


    More Views on News

    GSK Consumer: On the Recovery Path (Quarterly Results Update - Detailed)

    Jun 20, 2017

    While GSK consumer reported muted revenue growth, volumes are seen to be recovering.

    Apex frozen food Ltd. (IPO)

    Aug 21, 2017

    Should you subscribe to the IPO of Apex Frozen Foods Ltd?

    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

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    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.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    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!

    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


    Aug 22, 2017 (Close)


    • 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



    Compare Company With Charts