INSUBCONTINENT EXCLUSIVE:
Reliance Securities has a buy call on Hindustan Unilever with a target price of Rs 2,000.
The current market price of Hindustan Unilever is
Rs 1,734.10.
Time period given by the brokerage is one year when Hindustan Unilever price can reach the defined target
Investment rationale by the brokerage-Premiumisation diversification to ensure robust long-term growth: Premiumisation has always been
The key premium brands like Surf, Dove and Lipton clocked 11 per cent, 14 per cent and 18 per cent CAGR, respectively, over the last 6 years
significantly outpacing their respective category growth
HUL has lost market share in its mass-market brands like wheel due to higher competitive pressure, while the stronger growth in premium
brands has helped in sustaining revenue growth and market share
Apart from premiumisation strategy, product diversification through entry into newer categories like malted beverages, natural/herbal ensure
to 26 per cent in FY21E from the current level of 23 per cent on the back of consistent price growth, improved operating leverage and
12 per cent CAGR over FY19-21E
Its strong earnings growth is driven by 19 per cent CAGR in organic earnings over FY19-21E, while the inorganic initiative adds 7 per cent
to FY21E earnings, which translate into 23 per cent earnings CAGR for the same period.
Outlook: On a reverse DCF valuation methodology, the
implied revenue growth is pegged at 10 per cent over the next 20 years with a steady-state EBIT margin of 22 per cent, which we believe is
Considering HUL is most coveted Indian FMCG company, we believe an exit multiple of 30x is justifiable
While current valuation appears to be expensive, we believe it to be justified on the back of superior growth prospects led by highly
diversified portfolio and macro tailwinds
We value the stock at 45x FY21E earnings, which is 10 per cent discount to FY20E multiple to arrive at 1-year forward target price of Rs
