Hindustan Unilever (HINLEV) 789

Transcription

1 Result Update Rating matrix Rating : Buy Target : 117 Target Period : 12 months Potential Upside : 29% What s changed? Target Unchanged EPS FY16E Changed from 21. to 2.8 EPS FY17E Changed from 2.9 to 24.8 EPS FY18E Introduced at 28.1 Rating Unchanged Quarterly performance Q2FY16 Q2FY1 YoY % Q1FY16 QoQ % Sales EBITDA EBITDA % bps bps PAT Key financials Crore FY1 FY16E FY17E FY18E Net Sales 3,171 32,66 36,79 4,94 EBITDA,28,984 6,933 7,817 Net Profit 4,31 4,9,37 6,73 EPS( ) Adj. EPS( ) Valuation summary FY1 FY16E FY17E FY18E P/E Target P/E Div. Yield Mcap/Sales RoNW (%) RoCE (%) Stock data Particular Amount Market Capitalization ( Crore) 17,732.6 Total Debt (FY1) ( Crore). Cash and Investments (FY1) ( Crore),161.4 EV ( Crore) 16, week H/L 981 / 78 Equity capital crore Face value 1 Price performance Return % 1M 3M 6M 12M HUL ITC GCPL Colgate Research Analyst Sanjay Manyal sanjay.manyal@icicisecurities.com Parineeta Rajgarhia parineeta.rajgarhia@icicisecurities.com Good volume growth, better margins October 1, 21 Hindustan Unilever (HINLEV) 789 Hindustan Unilever (HUL) reported lower-than-estimated Q2FY16 numbers with net sales growing 4.7% YoY to crore (I-direct estimate: crore) led by volume growth of 7% as it took price cuts in the process of passing on benefits of benign commodity prices. Sales growth in S&D, personal products, beverages & foods was 1.6%, 9.%,.9% & 12.4%, YoY, respectively Operating margins improved 41 bps to 16.7% (I-direct estimate: 17.%) due to lower RM costs (316 bps decline as percentage of sales). HUL channelised these cost savings to increase A&P spend by 22 crore, an increment of 22 bps as percentage of sales PAT declined 2.6% YoY to crore on the back of 194 bps increase in tax rate due to phasing out of tax benefits & presence of exceptional income from sale of properties in the base quarter Volume growth expected to improve to ~8-9% FY17E onwards As the largest FMCG player, HUL s volume growth decelerated in line with the economic downturn from ~13% (FY11) to % in FY1, largely on the back of a slowdown in urban discretionary demand with rural growth remaining moderate. HUL witnessed 6% volume growth in H1FY16. Going ahead, we believe volume growth would remain moderate until FY16E led by a slower revival in GDP growth and headwinds in rural consumption. However, we believe that as the economy revives and growth gains traction, HUL s strong portfolio of brands across segments would aid volume growth back to ~8-9%, going forward. Volumes to lead soaps & detergents growth S&D, HUL s largest revenue contributing segment (~48% in FY1) witnessed modest CAGR of 12.% in FY1-1 led by an equal mix of volumes & prices. The pricing power of HUL is backed by the strong leadership position of HUL in both segments (~4% of value share in detergents and ~4% value share in soaps) & its presence across the value pyramid in each of them. Going ahead, we believe volume growth in S&D would be the key revenue growth driver estimated at 1.% CAGR (FY1-18E) on the back of high A&P spend. Surf, HUL s largest brand (~ 26 crore in FY1), Lifebuoy, Wheel & Rin are 2+ crore brands. We believe realisation growth would also be led by premiumisation with a revival in urban discretionary demand, going forward. Premiumisation to result in healthy growth in personal products HUL s PP (~29% of revenues, ~47% of PBIT in FY1) growth at 12.3% CAGR (FY1-1) has been largely led by volumes following lower penetration of oral, hair & skin care products & HUL s strengthening presence across these segments led by its strong brands, Fair & Lovely, Ponds, Lakme, Clinic Plus, Close-Up, etc. We believe, going ahead, HUL s brand strength would revive sales growth to 14.1% CAGR (FY1-18E) as consumer demand gains traction. Visibility in earnings, margins justify premium valuation; maintain BUY With strong brands in the growing aspirational segments, HUL, aided by an improvement in margins (18% in FY16E, 18.% in FY17E & 18.7% in FY18E), is strongly placed to capture a revival in consumer demand, going forward. We estimate sales growth & profitability growth of 1.7% & 12.1% CAGR, respectively, in FY1-18E. We value the stock at 36x its FY18E EPS of 28.1 and arrive at a target price of 117/share with a BUY recommendation. ICICI Securities Ltd Retail Equity Research

2 Variance analysis Q2FY16 Q2FY1E Q2FY1 YoY (%) Q1FY16 QoQ (%) Comments Net Sales 7, ,11.1 7, , Net sales grew 4.7% led by 7% volume growth. HUL took price cuts to pass on the benefits of benign commodity prices Operating Income Raw Material Expenses 3,899. 4,17.3 3, , With the decline in palm oil, PFAD & crude, raw material costs as percentage of sales dipped 316 bps in the quarter Employee Expenses Marketing Expenses 1,14. 1, , A&P spend was up by 22 crore as it increased 22 bps as percentage of sales Other operating expenses 1,24.2 1, , , EBITDA 1,32.9 1,43.1 1, , EBITDA margin (%) bps bps Operating margins increased 41 bps led by lower RM costs Depreciation Interest Other Income PBT 1, ,91.8 1, , Exceptional Items Exceptional items include restructuring expenses & gain due to property sales Tax Outgo PAT , , Net profit dipped 2.6% mainly on the back of an increase in tax rate for the company as tax benefits get phased out and presence of exceptional income in base quarter Key Metrics growth YoY (%) Soaps & detergents Muted sales growth in S&D with price de-growth offsetting volume growth Personal Products Robust growth in personal products Beverages Foods Foods segment witnessed strong growth on the back of healthy growth in Magnum, Knorr & Kissan brands Change in estimates FY16E FY17E FY18E ( Crore) Old New % Change Old New % Change New Comments Sales 33, , , , ,944.6 We have revised the S&D sales estimates as the category remains impacted by aggressive price cuts in promotion form EBITDA 6,7., ,216. 6, ,817.3 EBITDA Margin (%) bps bps 18.7 We estimate benign RM costs to support the EBITDA margins, going forward PAT 4,6.6 4,9.4-3.,6.8, ,72.8 We have marginally changed our tax estimates EPS ( ) Assumptions Current Earlier Comments ( crore) FY1 FY16E FY17E FY18E FY1 FY16E FY17E Soaps & detergents 14, , , , , ,9.6 18,817.8 We expect lower RM cost to impact category sales Personal Products 9,6. 1,7.2 11, , ,6. 1,7.2 11,71.3 Beverages 3,631. 3, ,49.9,12.7 3,631. 3, ,49.9 Foods 1, , ,41.9 2, , , ,41.9 ICICI Securities Ltd Retail Equity Research Page 2

3 Company Analysis Volumes to drive soaps & detergents growth S&D comprises the largest revenue segment for HUL contributing ~48% to revenues (FY1). HUL s strong brands in soaps (Lifebuoy, Lux, Liril & Rexona) & detergents (Wheel, Surf Excel, Surf, Vim) have aided the company s dominant position in both segments (~4% of value share in detergents & ~4% value share in soaps) over the years despite the constant tough competition from the global player, P&G. Hence, despite the high penetration in the segment (~99%), S&D revenue growth of 12.% CAGR in FY1-1 has been a mix of volume & price led growth. Dove, Pears, Hamam, Lifebuoy, Surf and Rin delivered double digit volume growth in Q2FY16. During H1FY16, Dove Hybrid was introduced while Liril was relaunched by HUL. Going ahead, we believe S&D revenues would be largely driven by volumes as soft input costs would lead to price cuts in the form of promotions. HUL s pricing power in the segment along with increasing rate of premiumisation would aid realisation growth. We expect S&D revenues to grow at a CAGR of 1.% in FY1-18E. With higher contribution of prices in the sales mix, we believe margins from the segment would also improve, thereby increasing the segment s contribution to overall EBIT from ~4% in FY1. Exhibit 1: S&D revenue ( crore) and YoY growth (%) FY1 FY11 FY12 FY13 FY14 FY1 FY16E FY17E FY18E Soaps & Detergents Sales (LHS) S&D Sales Growth (RHS) Exhibit 2: S&D EBIT ( crore) LHS & S&D EBIT Margin (%) RHS Exhibit 3: S&D s revenue, EBIT contribution to overall performance ` FY9 FY1 FY11 FY12 FY13 FY14 FY FY9 FY1 FY11 FY12 FY13 FY14 FY1 S&D EBIT S&D EBIT Margin (%) Contribution to Revenues Contribution to EBIT ICICI Securities Ltd Retail Equity Research Page 3

4 Premiumisation to result in healthy growth in personal products Personal products (PP), the highest contributor to HUL s PBIT (~47% in FY1) over the years, has witnessed a moderation in revenue growth & segmental margins following the slowdown in consumer discretionary demand and increasing competition. PP revenue growth moderated from high double digits in CY7-FY12 to high single digits in FY14. The growth in CY7-FY12 was led largely by volumes with price increases remaining minimal. However, with 17.2% YoY growth in PP segment profits in Q2FY16, it is an indication of the growing impact of premiumisation strategy of HUL. We expect this effect to continue going forward. However, we believe that with HUL s strong brand portfolio across the value pyramid (Premium - Pond s, Axe, Dove, Close Up; Popular - Vaseline, Sunsilk, Pepsodent; Mass Fair & Lovely, Clinic Plus) and presence across all categories of personal care (hair care, oral care, skin care, men s grooming, cosmetics & services), the company will be the key beneficiary from a revival in discretionary demand and booming personal products demand in the economy. During H1FY16, HUL launched Lakme 9 to Insta light cream, Lakme Absolute Vinyl eye liner, Lakme Absolute Lip Pout, Dove Oxygen Moisture shampoo, Fair & Lovely BB cream, Color Boost (new lip color under Elle 18). HUL s premium hair care brand TRESemme became a 1 crore brand in FY1 further helping the company in the implementation of its premiumisation strategy. We expect the PP segment to post healthy CAGR (FY1-18E) at 14.1% and revive its contribution to EBIT to FY11-12 levels (2-4%). The higher contribution to EBIT would also be aided by the increasing rate of premiumisation once demand revives. Exhibit 4: Personal product revenues ( crore) and growth (%) trend FY1 FY11 FY12 FY13 FY14 FY1 FY16E FY17E FY18E -1 Personal Products Sales (LHS) PP Sales Growth (RHS) ICICI Securities Ltd Retail Equity Research Page 4

5 Exhibit : PP EBIT ( crore) LHS and PP EBIT margin (%) - RHS Exhibit 6: PP s revenue and EBIT contribution to overall performance ` FY9 FY1 FY11 FY12 FY13 FY14 FY1 2 FY9 FY1 FY11 FY12 FY13 FY14 FY1 PP EBIT PP EBIT Margin (%) Contribution to Revenues Contribution to EBIT Premiumisation to be key revenue driver for beverages HUL s beverage business (tea brands: Lipton, Taj Mahal, Red Label; coffee brands: Bru) growth at 11.1% CAGR (FY1-1) has been led largely by prices following the high penetration of tea consumption in India, keeping volume growth muted. HUL is the second largest branded tea company in the country and is growing aggressively in the branded coffee business with its brand Bru. We believe that with increasing green tea and coffee culture in the country (home and out-of-the home) and shift of consumers to premium flavoured teas and tea bags, premiumisation would be the key revenue driver for HUL s beverage portfolio, going ahead. We expect revenue growth at 11.3% CAGR from FY1-18E. Further, we believe that with the increasing contribution of premium brands in sales mix, EBIT and EBIT margins from the segment would also improve further. Exhibit 7: Beverages revenues ( crore) and growth (%) trend FY1 FY11 FY12 FY13 FY14 FY1 FY16E FY17E FY18E Beverages Sales (LHS) Beverages Growth (RHS) ICICI Securities Ltd Retail Equity Research Page

6 Exhibit 8: Beverages EBIT ( crore) LHS and EBIT margin - RHS Exhibit 9: Beverages revenue & EBIT contribution to overall performance FY9 FY1 FY11 FY12 FY13 FY14 FY FY9 FY1 FY11 FY12 FY13 FY14 FY1 Beverages EBIT Beverages EBIT Margin (%) Contribution to Revenues Contribution to EBIT Foods business growth expected at 13.1% CAGR in FY1-18E The foods segment, the biggest opportunity for the future but the weakest performer in HUL s portfolio, posted healthy revenue growth of 21% CAGR in FY1-1 but remained a dragger on the earnings front. The segmental margins have remained subdued over the years. We believe that though HUL has strong brands in the segment, Kissan, Knorr, Kwality Walls, the company has been unable to establish itself in the higher growth segments of packaged food (noodles, dairy, biscuits), keeping earnings growth muted. HUL has been ramping up its presence across various categories recently (premium ice cream Magnum, Kissan Twist ketchup, relaunch of Kissan Mango as flagship jam). Going ahead, we believe that increasing competition in the segment from leading players in the branded foods category (Nestlé, ITC, Britannia) would keep HUL s foods revenue growth at 13.1% CAGR (FY1-18E) with no significant contribution to EBIT until FY16E. Exhibit 1: Foods revenues ( crore) and growth (%) trend FY1 FY11 FY12 FY13 FY14 FY1 FY16E FY17E FY18E - -1 Foods Sales (LHS) Foods Sales Growth (RHS) ICICI Securities Ltd Retail Equity Research Page 6

7 Exhibit 11: Foods EBIT ( crore) LHS and EBIT margin - RHS Exhibit 12: Foods revenue and EBIT contribution to overall performance FY9 FY1 FY11 FY12 FY13 FY14 FY FY9 FY1 FY11 FY12 FY13 FY14 FY1 Foods EBIT Foods EBIT Margin (%) Contribution to Revenues Contribution to EBIT ICICI Securities Ltd Retail Equity Research Page 7

8 EBITDA margin improvement to 18.7% by FY18E HUL has maintained its raw material (RM) cost to sales ratio at ~3% over the years (CY7-FY1). In spite of an unprecedented increase in RM costs in FY12 (~4%), the company s strong brand equity across categories helped it to pass on the impact through higher prices while maintaining margins and volume growth. Going ahead, with HUL shifting its focus towards higher growth and premium product categories that would drive higher realisation, we expect raw material cost as a percentage of sales to moderate to 49.1% by FY18E on the back of global decline in commodity prices as well as HUL s internal cost efficiencies and aid margins to 18.7% by FY18E. We believe the savings in raw material costs would be directed towards higher marketing spends to fight competition and aid new launches. Exhibit 13: EBITDA margin (%) and RM cost to sales (%) trend FY1 FY11 FY12 FY13 FY14 FY1 FY16E FY17E FY18E EBITDA Margin (%) - LHS RM cost to sales (%) - RHS Higher margins & lower taxes to aid PAT growth HUL s effective tax rate has increased over the years from ~17% in CY7 to ~23% in FY14 and ~3% in FY1 as a result of phasing out of tax benefits. However, going ahead, we believe that lower corporate tax rate would more than compensate for expiry of tax benefits in most of its factories. We believe a strong 18 bps improvement in operating margins due to a decline in RM cost would result in steady earnings growth at 12.1% CAGR in FY1-18E. ICICI Securities Ltd Retail Equity Research Page 8

9 Exhibit 14: Adjusted PAT ( crore) & tax rate (percentage of PBIT) FY1 FY11 FY12 FY13 FY14 FY1 FY16E FY17E FY18E PAT - LHS Tax Rate (% of PBIT) - RHS ICICI Securities Ltd Retail Equity Research Page 9

10 Outlook & valuation We believe that though HUL s volume growth would remain subdued until FY16E, being the largest FMCG player in the country, it would be the key beneficiary of a revival in consumer demand, going forward. HUL s strong portfolio of brands across segments would aid volume growth back to ~8-9%, going forward. HUL s key growth driver would be the company s presence across the value pyramid in the segments where it is present. Also, with the company s increasing focus towards premiumisation (launch of liquid detergents, Magnum, Sunsilk Keratin range, Lipton Green Tea, Bru Gold, flavoured tea bags etc), we believe revenue and margin growth would continue to remain healthy with a revival in discretionary demand. HUL s soaps and detergents growth would be largely led by volumes given the company s dominance and ability to develop the market on the back of promotions in the segment. Hence, we expect S&D revenue growth at 1.% CAGR (FY1-18E). For personal products, we believe higher innovation and premiumisation would be key revenue drivers. We expect heightened activity on part of the company in this segment to regain its lost volume growth. We expect revenue growth in PP to revive to 14.1% CAGR (FY1-18E). For beverages, we believe premium tea and coffee would drive revenue growth at 11.3% CAGR (FY1-18E). We expect HUL s food business growth at 13.1% (FY1-18E) CAGR largely led by realisation growth. With prolonged revenue and earnings growth visibility led by a revival in volume growth and improving product mix, we believe the stock would command a premium to its peers. We believe that an improvement in operating margins (18% in FY16E, 18.% in FY17E and 18.7% in FY18E) due to subdued commodity prices globally, premiumisation strategy as well as reducing corporate tax rate, going forward, augur well for the company and justify premium valuation. We value the stock at 36x its FY18E EPS of 28.1 to arrive at a target price of 117 per share and maintain BUY recommendation. Exhibit 1: Valuations Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) (x) (%) (%) FY FY16E FY17E FY18E ICICI Securities Ltd Retail Equity Research Page 1

11 Company snapshot 1,1 1, Target Price Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-1 Jun-1 Sep-1 Dec-1 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Source: Bloomberg, Company, ICICIdirect.com Research Key events Event 28-9 Stock remains a non-performer following no key innovations and significant increase in palm oil and crude oil prices keeping earnings growth moderate FY9 Volume growth starts declining following weakening economic growth. Volumes witness de-growth of % during January-March, 29 Oct-Dec, 29 Led by the slowdown in CY9, volume growth until Q3FY1 remains below % with market share falling across categories Feb-1 Launches 'Must Win, 21' programme involving strategic pricing & huge distribution push to mop up the company's falling performance Dec-1 Though profit growth remains moderate at 1%, the stock posts a return of ~28% following strong volume growth and marketing initiatives of HUL Q4FY11 Soaps & detergents margins get dented drastically due to exceptional increase in input (LAB) costs leading the stock to correct ~21% from January-March, 211 Q1FY12 Hikes prices (-8% overall & ~21% in S&D) to pass on input cost inflation. Gains market share from unorganised players with rising input costs Softening in volume growth to high single digits along with slowing rate of premiumisation. However, stock continues to rise until October, 212 (return of ~4% H1FY13 from April, 213) mirroring the FMCG Index as defensives were the safest bet in the market considering the slowing economic scenario H2FY13 Stock declines ~12% led by consistent weakness in volume growth (low sigle digits) Apr-13 Unilever announces open offer at 6/share to increase its stake in HUL to 7% from 2.% Jul-13 The stock soars ~12% on account of FTSE and MSCI re-balancing post the closure of open offer Oct-14 Volume growth remains subdued at 4% as urban discretionary demand remain dismal Dec-14 Commodity prices including palm oil, crude and related derivatives witness significant decline Top 1 Shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Unilever PLC 3-Jun , Vontobel Asset Management, Inc. 31-Jul Aberdeen Asset Management (Asia) Ltd. 31-Jul Life Insurance Corporation of India 3-Jun The Vanguard Group, Inc. 3-Sep BlackRock Institutional Trust Company, N.A. 3-Sep Aberdeen Asset Managers Ltd. 31-Aug William Blair & Company, L.L.C. 3-Jun Lyxor Asset Management 3-Sep APG Asset Management 31-Mar Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Sep-14 Dec-14 Mar-1 Jun-1 Sep-1 Promoter FII DII Others Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Life Insurance Corporation of India 333.m 23.14m Allianz Global Investors U.S. LLC m -3.1m William Blair & Company, L.L.C. 3.3m 2.1m Emerging Global Advisors, LLC -3.38m -2.63m BlackRock Asset Management North Asia Limited 18.44m 1.48m British Columbia Investment Management Corp m -1.6m Mirae Asset Global Investments (Hong Kong) Limited 12.87m 1.3m Aberdeen Asset Managers Ltd m -1.6m APG Asset Management 1.92m.78m BlackRock Institutional Trust Company, N.A m -1.3m ICICI Securities Ltd Retail Equity Research Page 11

12 Financial summary Profit and loss statement Crore (Year-end March) FY1 FY16E FY17E FY18E Total operating Income Growth (%) Raw Material Expenses 1, , , ,16.9 Employee Expenses 1,78.9 1, , ,18.6 Marketing Expenses 3, ,483.4,77.,69.4 Administrative Expenses 1,93.8 2,21.6 2, ,9. Other expenses 2,89.2 2,67.4 3, ,62.2 Total Operating Expenditure 2, , , ,946.2 EBITDA Growth (%) Depreciation Interest Other Income ,37.4 Exceptional Income PBT 6, ,36. 7, ,6.3 Total Tax 1, ,27. 2, ,492. PAT Growth (%) EPS ( ) Cash flow statement Crore (Year-end March) FY1 FY16E FY17E FY18E Profit after Tax 4,31.3 4,9.4, ,72.8 Add: Depreciation (Inc)/dec in Current Assets Inc/(dec) in CL and Provisions , ,3. 1,746.3 CF from operating activities (Inc)/dec in Investments (Inc)/dec in loans & advances (Inc)/dec in Fixed Assets Others CF from investing activities Issue/(Buy back) of Equity.1... Inc/(dec) in loan funds.... Dividend paid & dividend tax -3, ,32.8 -,41. -6,49.1 Inc/(dec) in Sec. premium.... Others CF from financing activities Net Cash flow Opening Cash 2,221. 2,37.6 1,74.9 2,687.6 Closing Cash Balance sheet Crore (Year-end March) FY1 FY16E FY17E FY18E Liabilities Equity Capital Reserve and Surplus 3,8.4 3,98.1 4, ,342.4 Total Shareholders funds 3, ,21.4 4,3.1 4,8.8 Other Non Current Liabilities Long Term Provisions Total Liabilities Assets Gross Block 4,48.6 4,78.6,8.6,28.6 Less: Acc Depreciation 1, , ,1. 2,84.3 Net Block 2,43. 2, ,47.6 2,368.3 Capital WIP Total Fixed Assets 2,914. 2, ,97.6 2,718.3 Net Intangible Assets Other Investments ,4.1 Liquid Investments Inventory 2,62.7 3, ,22.4 3,89.7 Debtors ,8.3 1,177.9 Loans and Advances Investments & Other CA Cash 2,37.6 1,74.9 2, ,617.2 Total Current Assets 9,263. 9, , ,72.9 Creditors, ,74.6 6,84. 8,76.7 Provisions & other CL 3, ,886. 4,636.6,16.1 Total Current Liabilities 8, , , ,236.9 Net Current Assets Others Non-Current Assets Application of Funds Key ratios (Year-end March) FY1 FY16E FY17E FY18E Per share data ( ) EPS Cash EPS BV DPS Cash Per Share Operating Ratios (%) EBITDA/Total Operating Income PBT Margin PAT Margin Inventory days Debtor days Creditor days Return Ratios (%) RoE RoCE Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt/EBITDA.... Debt / Equity.... Current Ratio Quick Ratio ICICI Securities Ltd Retail Equity Research Page 12

13 ICICIdirect.com coverage universe (FMCG) CMP M Cap EPS ( ) P/E (x) Price/Sales (x) RoCE (%) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY1E FY16E FY17E FY1E FY16E FY17E FY1E FY16E FY17E FY1E FY16E FY17E FY1E FY16E FY17E Colgate (COLPAL) 99 1,18 Hold 26, Dabur India (DABIND) Buy 1, GSK CH (SMIBC),99 7,193 Buy 26, Hindustan Unilever (HINLEV) 793 1,17 Buy 177, ITC Limited (ITC) Buy 26, Jyothy Lab (JYOLAB) Hold, Marico (MARIN) 4 32 Buy 28, Nestle (NESIND) 6,2 6,4 Hold 61, Tata Global Bev (TATTEA) 13 1 Hold 8, VST Industries (VSTIND) 1,63 1,7 Hold 2, ICICI Securities Ltd Retail Equity Research Page 13

14 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >1%/2% for large caps/midcaps, respectively, with high conviction; Buy: >1%/1% for large caps/midcaps, respectively; Hold: Up to +/-1%; Sell: -1% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 4 93 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 14

15 ANALYST CERTIFICATION We /I, Sanjay Manyal, MBA (Finance) and Parineeta Rajgarhia, MBA (Finance), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH99. ICICI Securities is full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. 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