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Hindustan Unilever Ltd (HUL) is the largest Indian fast-moving consumer goods (FMCG) player with a presence in household care, skincare, haircare, nutrition and numerous other sectors in the country. Some of its renowned brands include Lifebuoy, Lux, Surf Excel, Dove, Lakme, Brooke Bond and Kwality Wall's and many more. It is virtually at the top of the Indian market and investors now watch its stock very closely.
Based on the latest available data:
Share Price (NSE): Rs 2,681.70
Price Change: -11.85 (-0.44%) at close as of 3:29 PM GMT+5:30
Market Capitalization (intraday): Rs 6.301 trillion
Beta (5Y Monthly): 0.13, indicating relatively low volatility compared to the market.
Price-to-Earnings Ratio (TTM): 61.09, showing the stock’s premium valuation in relation to its earnings.
Earnings Per Share (TTM): Rs 43.90
Dividend Yield (Forward): 1.56% (Rs 42.00 per share).
Ex-Dividend Date: June 14, 2024
Earnings Date: October 23, 2024
HUL has been doing very well in the Indian FMCG space and sells at a premium which is also justified, given key valuation ratios as of October 21, 2024 below:
Market Capitalization: Rs 6.33 trillion
Enterprise Value (EV): Rs 6.21 trillion - This offers improvement in the assessment of the worth of a company as it incorporates DEBT, devoid of cash.
Trailing Price to Earnings (P/E) Ratio: 61.24: The P/E ratio determines how much off rupees investors anticipate to earn on every single rupee worth of earnings; hence the relatively high P/E in HUL.
Price-to-Sales Ratio (ttm): 10.34 - This ratio compares HUL’s stock price to its sales, showing that investors are paying a premium for its revenue-generating capability.
Price-to-Book Ratio (mrq): 12.36 - Such relations imply that HUL’s stock price is much more than its book value, which means that there are high expectations throughout the company in the future, bringing the 12 to a very high ratio of books.
Enterprise Value/Revenue: 10.15 - This ratio measures the company's total value in relation to its revenue, demonstrating HUL's ability to generate significant sales for its valuation.
Enterprise Value/EBITDA: 39.79 - This shows the capacity for earnings, in relation to the value of the company, highlighting the high prices as well as strong profitability of the company.
The earnings and the balance sheet of Hindustan Unilever Ltd depict its geometrics in profitability, operational performance and financial stability. Listed below are key financial highlights:
Profit Margin: 16.64% - HUL demonstrates strong profitability, with a profit margin of 16.64%, highlighting its ability to convert revenue into profit efficiently.
Revenue (ttm): Rs 621.07 billion - This indicates the company’s substantial sales over the trailing twelve months (ttm), echoing its leadership in the FMCG sector.
Net Income Available to Common (ttm): Rs 103.33 billion - The net income showcases the company’s earnings available to shareholders, marking significant profitability.
Diluted Earnings Per Share (EPS) (ttm): Rs 43.90 - EPS reflects the company’s earnings divided by outstanding shares, providing a measure of profitability on a per-share basis.
Total Cash (mrq): Rs 118.89 billion - The company holds significant cash reserves, ensuring liquidity and financial flexibility for future investments or debt repayments.
Total Debt/Equity (mrq): 2.89% - HUL’s low debt-to-equity ratio indicates conservative use of debt and strong financial health, maintaining a balance between debt and equity financing.
These financial metrics illustrate HUL’s strong profit-generating capacity, efficient capital management, and a healthy balance sheet.
HINDUNILVR.NS: +1.65%
S&P BSE SENSEX: +11.05%
HINDUNILVR.NS: +9.32%
S&P BSE SENSEX: +22.67%
HINDUNILVR.NS: +14.89%
S&P BSE SENSEX: +31.67%
HINDUNILVR.NS: +37.43%
S&P BSE SENSEX: +104.13%
This comparison shows that while HUL has shown positive returns across various time frames, it has significantly underperformed compared to the S&P BSE SENSEX index, particularly in the 5-year and 1-year periods.
HUL will release its financial results for the second quarter FY 25 on 23rd October 2024. Most analysts predict little growth in either net profit or revenue, given the slack demand and also the increase in commodity prices.
According to a poll conducted by Livemint among six brokerages, Q2FY25 net profit is expected to remain stable at Rs 2,670 crore compared to Rs 2,668 crore in the same quarter last year (YoY). Revenue is projected to grow by 3%, reaching Rs 15,737 crore from Rs 15,276 crore YoY.
The volume growth for HUL will increase by 5% for Q2FY25 because some of the prices for other product lines have been raised increasing the volume value growth gap. It is expected that rural areas will have a higher demand compared to urban regions and therefore there is expectation of a stable quarter on quarter (QoQ) demand trends. In the base quarter (Q2FY24), an additional 1% sales growth was achieved due to the end of the secondary tax dispute favorably.
As to the operating income, the EBITDA which is earnings before interest, taxes, depreciation and amortization is expected to be at Rs 3,705 crore which is nearly the same as Rs 3,694 crore in the same quarter last year. On the other hand, the EBITDA margin is projected to decline by 106 basis points (bps) this year to 23.54% relative to the last year which was 24.60% due to expansion of advertising costs, increased royalty costs, and loss of consignment sales of GSK.
Kotak Institutional Equities forecasts HUL’s Home Care segment to grow by 5.3% YoY, improving from 4.6% in the previous quarter. The Beauty and Personal Care (BPC) segment is expected to see a 3% like-for-like (LFL) growth, supported by positive trends in the personal wash category.
Foods and Refreshments division’s growth is expected at 4.5 % higher than the growth of the 1.5% growth recorded in Q1FY25.
There are several areas that should be followed up including HUL’s expectations for rural versus urban demand, level of competition faced by the company and the trends of raw materials pricing. These variables will be key determinants in the performance of the company in the succeeding quarters.
Despite an overall bullish outlook for Hindustan Unilever Ltd, it has been in a bearish phase since reaching a high of Rs 3,035 on September 23rd 2024. Currently, the price is trading around a critical support zone at Rs 2,720.
If the price breaches this level, it could drop further, with the next major support level being the psychological mark of Rs 2,500.
If the price further drops below Rs 2,500, There is an ascending trendline that may act as a key support, to stabilize the price.
HUL remains a strong market leader despite recent challenges from inflation and muted demand, which have led to a temporary bearish trend. The stock’s long-term prospects remain positive, with key support levels at Rs 2,720 and Rs 2,500.
Continued growth in rural demand and strong segment performance will be vital in driving future stock movements, with projections indicating a gradual rise through 2030. Investors should stay cautious of short-term volatility.
