Result Update May 11, 215 Rating matrix Rating : Hold Target : 92 Target Period : 12 months Potential Upside : 4% What s changed? Target EPS FY16E EPS FY17E Rating Unchanged Unchanged Unchanged Unchanged Quarterly performance Q4FY15 Q4FY14 YoY % Q3FY15 QoQ % Sales 7555. 6935.8 8.9 7579.2 -.3 EBITDA 1318.2 177.6 22.3 1331.5-1. EBITDA % 17.2 15.2 198 bps 17.1 5 bps PAT 118.1 872.1 16.7 1252.2-18.7 Key financials Crore FY14 FY15 FY16E FY17E Net Sales 27,48 3,171 33,311 37,398 EBITDA 4,475 5,28 5,872 6,967 Net Profit 3,867 4,332 4,5 5,354 EPS( ) 17.9 2. 2.8 24.8 Adj. EPS( ) 13.3 14.9 15.9 18.1 Valuation summary FY14 FY15 FY16E FY17E P/E 48.6 43.4 41.8 35.1 Target P/E 5.5 45. 43.4 36.5 Div. Yield 1.5 1.7 1.8 2.1 Mcap/Sales 6.9 6.2 5.6 5. RoNW (%) 118. 19.2 11.1 11.2 RoCE (%) 128.6 124.1 125.4 126.2 Stock data Particular Amount Market Capitalization ( Crore) 187,921.3 Total Debt (FY14) ( Crore). Cash and Investments (FY14) ( Crore) 4,679.9 EV ( Crore) 183,241.3 52 week H/L 981 / 55.25 Equity capital 216.3 Crore Face value 1 Price performance Return % 1M 3M 6M 12M HUL -2. -1.2 17.8 61.8 ITC -5.3-12.2-7.8-4.1 GCPL -7.2-3.3 17.2 45. Colgate -2.1 9.4 15.5 45.4 Research Analyst Sanjay Manyal sanjay.manyal@icicisecurities.com Parth Joshi parth.joshi@icicisecurities.com Parineeta Rajgarhia parineeta.rajgarhia@icicisecurities.com Hindustan Unilever (HINLEV) 868 Strong margins supporting bottomline growth Hindustan Unilever s Q4FY15 results were in line with our estimates on the back of 6% volume growth. However, net sales grew 8.9% YoY to 7555 crore (I-direct estimate: 778.7 crore) with limited realisation growth as it has taken ~5% price cut since January 215. Sales growth YoY in S&D, personal products, beverages & foods stood at 5.6%, 13.4%, 12.3% and 13.6%, respectively Operating margins improved ~19 bps to 17.2% (I-direct estimate: 16.8%) as benign commodity prices lowered RM cost as percentage of sales by ~31 bps. HUL channelised these savings to raise A&P spend by 188 crore, increment of 15 bps as percentage of sales With exceptional income of 179.4 crore from sale of property, PAT increased 16.7% YoY to 118 crore (I-direct estimate: 988.9 crore) Volume growth expected to remain low until FY16E Being the largest FMCG player, HUL s volume growth decelerated in line with the economic downturn. Volume growth has declined from ~13% (FY11) to ~4% in FY14 and 5% in FY 15. The slowdown was largely on the back of a slowdown in urban discretionary demand with rural growth remaining moderate. 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 as the economy revives and growth gains traction, HUL s strong portfolio of brands across segments would bring volume growth back to 7-8% in future. Soaps, detergents to witness price led growth S&D, HUL s largest revenue contributing segment (~48% in FY15) witnessed a modest CAGR of 12.5% in FY1-15 led by an equal mix of volumes and prices. The pricing power of HUL is backed by strong leadership position of HUL in both segments (~4% of value share in detergents and ~45% value share in soaps) and its presence across the value pyramid in each of them. Going ahead, we believe that led by the high penetration (~99%), volume growth in S&D would remain muted and price growth would be a key revenue growth driver estimated at 12.1% CAGR (FY15-17E) in S&D. Surf became the largest brand for HUL after it crossed the ~ 26 crore mark in FY15. Lifebuoy, Wheel & Rin are also 2+ crore brands. We believe price led growth would also be led by premiumisation with a revival in urban discretionary demand. Sustained healthy growth in personal product revenues soon HUL s PP (~29% of revenues, ~47% of PBIT in FY15) growth at 12.3% CAGR (FY1-15) has been largely led by volumes following lower penetration of oral, hair & skin care products and HUL s strengthening presence across these segments led by its strong brands, Fair & Lovely, Ponds, Lakme, Clinic Plus, Close-Up, etc. However, following the slowdown in discretionary demand, increasing competition in PP segment, its PP sales witnessed a slowdown since Q3FY13. However, we believe, going ahead HUL s brand strength would revive sales growth to 14.7% CAGR (FY15-17E) as consumer demand gains traction. Strong brands augur well for revival in demand; maintain HOLD We expect the near term slowdown to keep HUL s growth moderate until FY16E. However, with a revival in urban demand and strong brands in growing aspirational segments, HUL is strongly placed to capture booming consumer demand. We maintain our target price of 92/share. ICICI Securities Ltd Retail Equity Research
Variance analysis Q4FY15 Q4FY15E Q4FY14 YoY (%) Q3FY15 QoQ (%) Comments Net Sales 7,555. 7,78.7 6,935.8 8.9 7,579.2 -.3 Net sales grew 8.9% led by 6% volume growth & limited realisation growth Operating Income 12.6 154.2 158.3-23.8 195.1-38.2 Raw Material Expenses 3,827. 4,3.1 3,73.8 2.6 3,848. -.5 With the decline in palm oil, PFAD & crude, raw material costs as percentage of sales dipped 31 bps in the quarter Employee Expenses 388.4 48.6 378.3 2.7 441.8-12.1 Marketing Expenses 1,27.9 1,3.7 84.3 22.3 977.1 5.2 A&P spend was up by 188 crore as it increased by 15 bps as percentage of sales Other operating expenses 1,114.2 1,121.6 1,67.1 4.4 1,175.9-5.2 EBITDA 1,318.2 1,298.9 1,77.6 22.3 1,331.5-1. EBITDA margin (%) 17.2 16.5 15.2 198 bps 17.1 5 bps Operating margins increased ~19 bps led by lower RM costs Depreciation 7.5 67.5 65.8 7.2 73.1-3.5 Interest.. 5.3-1. 4.2-1. Other Income 98.4 181.3 15.6-34.7 12.1-18. PBT 1,346.1 1,412.7 1,157.1 16.3 1,77.8-24. Exceptional Items 179.4. 66. 171.7 396.6-54.8 Exceptional gain mainly due to property sales Tax Outgo 57.4 423.8 351. 44.6 518.7-2.2 PAT 1,18.1 988.9 872.1 16.7 1,252.2-18.7 Net profit grew 16.7% mainly due to exceptional gain of 179 crore from the sale of property. However, adjusting for that, PAT growth remained at 9% Key Metrics growth YoY (%) Soaps & detergents 5.6 13.1 9.6 6. Dismal sales growth in S&D with volume growth remaining negative Personal Products 13.4 15.6 8.3 6.5 Beverages 12.3 12.1 7.5 8.2 Foods 13.6 16.4 12.7 12.6 Foods segment witnessed strong growth on the back of healthy growth in Magnum, Knorr & Kissan brands Change in estimates FY16E FY17E ( Crore) Old New % Change Old New % Change Comments Sales 33,311.1 33,311.1. 37,397.9 37,397.9. No change in our estimates EBITDA 5,872.4 5,872.4. 6,967.4 6,967.4. EBITDA Margin (%) 17.3 17.3 bps 18.3 18.3 bps PAT 4,499.7 4,499.7. 5,354. 5,354.. EPS ( ) 2.8 2.8. 24.8 24.8. Assumptions Current Earlier ( crore) FY14 FY15E FY16E FY17E FY15E FY16E FY17E Soaps & detergents 13,683.4 14,876.6 16,877.5 18,71. 15,157.8 16,877.5 18,71. No change in our estimates Personal Products 8,12.9 9,6.5 1,277.5 11,848.3 9,5.5 1,277.5 11,848.3 Beverages 3,311.9 3,631.5 4,131.2 4,659.7 3,629.2 4,131.2 4,659.7 Foods 1,648.3 1,891.8 2,12.8 2,333.6 1,93.3 2,12.8 2,333.6 Comments ICICI Securities Ltd Retail Equity Research Page 2
Company Analysis Soaps, detergents growth to be largely price led S&D comprises the largest revenue segment for HUL contributing ~48% to revenues (FY15). HUL s strong brands in soaps (Lifebuoy, Lux, Liril, Rexona) and detergents (Wheel, Surf Excel, Surf, Vim) have aided the company s dominant position in both segments (~4% of value share in detergents and ~45% value share in soaps) over the years, despite the constant tough competition from the global player, P&G. Hence, in spite of the high penetration in the segment (~99%), S&D revenue growth of 12.5% CAGR in FY1-15 has been a mix of volume and price led growth. Going ahead, we believe with HUL s pricing power in the segment along with increasing rate of premiumisation, S&D revenues would be largely price led with volume growth remaining modest. We expect S&D revenues to grow at a CAGR of 12.1% from FY15-17E. 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 FY15. Exhibit 1: S&D revenue ( crore) and YoY growth (%) 2 18 16 14 12 1 8 6 4 2 6 54.4 5 4 3 21. 19.4 2 13.5 6.4 7.7 8.7 1.9 1-1 -16.4-2 -3 FY9 FY1 FY11 FY12 FY13 FY14 FY15 FY16E FY17E Soaps & Detergents Sales (LHS) S&D Sales Growth (RHS) *FY9 contains 15 months numbers due to change in reporting from CY to FY Exhibit 2: HUL s S&D EBIT ( crore) LHS & S&D EBIT Margin (%) RHS Exhibit 3: S&D s revenue and EBIT contribution to overall performance 25 2 15 1 5 15. 14.3 12.7 11.6 13.1 9.5 ` FY9 FY1 FY11 FY12 FY13 FY14 FY15 16 13.7 14 12 1 8 6 4 2 6 48.1 46.5 48.9 49.3 44.6 5 49. 48.4 446.3 42.3 3 4. 4.1 36.9 39.6 2 3.5 1 FY9 FY1 FY11 FY12 FY13 FY14 FY15 S&D EBIT S&D EBIT Margin (%) Contribution to Revenues Contribution to EBIT ICICI Securities Ltd Retail Equity Research Page 3
Personal products performance to regain traction Personal products (PP), the highest contributor to HUL s PBIT (~47% in FY15) over the years has witnessed a moderation in revenue growth and segment s margins following the slowdown in consumer discretionary demand and increasing competition. PP revenue growth has moderated from high double digits in CY7-FY12 to high single digits in FY14. The growth in CY7-FY12 was led largely through volumes with price increases remaining minimal. However, following the significant inflation in the economy along with the slowdown in demand, price hikes at this time have impacted volume growth tremendously for the company. 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 segment (hair care, oral care, skin care, men s grooming, cosmetics & services), the company will be the key beneficiary of a revival in discretionary demand and booming personal products demand in the economy. Hence, we expect PP revenue growth to gain traction from H1FY16E, posting a healthy CAGR (FY15-17E) at 14.7% and reviving its contribution to EBIT to FY11-12 levels (52-54%). 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 (%) 14 46.1 12 1 8 6 4 2-2 5 4 3 17.1 14.1 15.32 15.773 9.1 1.9 8.7 1-6.3 FY9 FY1 FY11 FY12 FY13 FY14 FY15 FY16E FY17E -1 Personal Products Sales (LHS) PP Sales Growth (RHS) Exhibit 5: PP EBIT ( crore) LHS and PP EBIT margin (%) - RHS Exhibit 6: PP s revenue and EBIT contribution to overall performance 3 25 2 15 1 5 1948.9 268.1 26.5 1744.6 1429. 1494.8 1296.5 26.1 25.7 25.6 25.5 ` 2424.4 25.5 28 26.9 27 27 26 26 25 6 5 4 3 2 1 44.6 46.2 26.2 28.4 54.6 52.2 29.7 31.5 48.3 46.4 47.2 29. 29.1 29.3 FY9 FY1 FY11 FY12 FY13 FY14 FY15 25 FY9 FY1 FY11 FY12 FY13 FY14 FY15 PP EBIT PP EBIT Margin (%) Contribution to Revenues Contribution to EBIT ICICI Securities Ltd Retail Equity Research Page 4
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 (FY1-15) 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. Hence, we expect revenue growth to gain traction at 13.3% CAGR from FY15-17E. 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 from the segment. Exhibit 7: Beverages revenues ( crore) and growth (%) 6 5 4 3 2 1-1 -2 FY9 FY1 FY11 FY12 FY13 FY14 FY15E FY16E FY17E 6 5 4 3 2 1-1 -2 Beverages Sales (LHS) Beverages Growth (RHS) Exhibit 8: Beverages EBIT ( crore) LHS and EBIT margin - RHS Exhibit 9: Beverages revenue & EBIT contribution to overall performance 7 6 5 4 3 2 1 16.9 14.9 15.3 16. 17.5 14. 13.4 FY9 FY1 FY11 FY12 FY13 FY14 FY15 2 15 1 5 14 13 12 11 9.6 111.2 9 8 7 6 5 11.4 13.1 11. 12.1 11.9 12. 11.8 13. 12. 11.6 11.9 11.8 FY9 FY1 FY11 FY12 FY13 FY14 FY15 Beverages EBIT Beverages EBIT Margin (%) Contribution to Revenues Contribution to EBIT ICICI Securities Ltd Retail Equity Research Page 5
Foods business growth to remain modest at 11.1% CAGR in FY15-17E 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 FY1-15 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 launched in Delhi & Kolkata, Knorr instant noodles launched). 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 moderate at 11.1% CAGR (FY15-17E) with no significant contribution to EBIT until FY16E. Exhibit 1: Foods revenues ( crore) and growth (%) 25 5.6 6 2 5 15 4 3 1 15.2 23.58 14.8 2 1.8 9.5 11.2 11. 5 1 FY9-9.6 FY1 FY11 FY12 FY13 FY14 FY15 FY16E FY17E -5-1 Foods Sales (LHS) Foods Sales Growth (RHS) Exhibit 11: Foods EBIT ( crore) LHS and EBIT margin - RHS Exhibit 12: Foods revenue and EBIT contribution to overall performance 7 6 6 4.4 5 5 4 3.7 4 2.5 3 3 1.8 1.4 2 2.6 1.2 1-1 FY9 FY1 FY11 FY12 FY13 FY14 FY15-1 7 6. 6.3 5.8 5.9 6.2 6 5 5.1 5.4 4 3 1.2 1.4 1.6 2.6.7.9.3 1 FY9 FY1 FY11 FY12 FY13 FY14 FY15 Foods EBIT Foods EBIT Margin (%) Contribution to Revenues Contribution to EBIT ICICI Securities Ltd Retail Equity Research Page 6
EBITDA margin improvement to remain modest until FY16E HUL has maintained its raw material (RM) cost to sales ratio at ~53% over the years (CY7-FY15). In spite of an unprecedented increase in RM costs in FY12 (~54%), 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 ~51% by FY16E and aid margins to ~17% by FY16E. 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 (% of net sales) and RM cost to sales (% of net sales) 2 19 18 17 16 15 14 13 12 11 1 18.3 17.3 16.9 16. 15.5 15.5 14.7 14.9 13.7 FY9 FY1 FY11 FY12 FY13 FY14 FY15E FY16E FY17E 56 55 54 53 52 51 5 EBITDA Margin (%) - LHS RM cost to sales (%) - RHS Higher taxes to limit PAT growth HUL s effective tax rate has increased over the years from ~17% in CY7 to ~23% in FY14 and to ~3% in FY15. However, going ahead, it is expected to increase further to ~31% by FY16E, following the completion of tax benefits in most of its factories. We believe the strong 14 bps improvement in operating margins due to decline in RM cost despite the increasing tax rate would result in healthy earnings growth at 16.5% CAGR in FY15-17E. Exhibit 14: Adjusted PAT ( crore) & Tax rate (% of PBIT) 5 4 3 2 233 28 1982 2383 2866 3214 3436 398 4667 35 3 25 2 15 1 1 5 FY9 FY1 FY11 FY12 FY13 FY14 FY15E FY16E FY17E PAT - LHS Tax Rate (% of PBIT) - RHS ICICI Securities Ltd Retail Equity Research Page 7
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 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, 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 (S&D) growth would be largely price led given the company s dominance and ability to develop the market in the segment. Hence, we expect S&D revenue growth at 12.1% CAGR (FY15-17E). For personal products (PP), we believe higher innovation and premiumisation would be key revenue drivers. We expect heightened activity by the company in this segment to regain its lost volume growth. We expect the revenue growth in PP to revive to 14.7% CAGR (FY15-17E). For beverages, we believe premium tea and coffee would drive revenue growth at 13.3% CAGR (FY15-17E). We expect HUL s food business growth to remain modest at 11.1% (FY15-17E) CAGR largely led by prices. With the prolonged revenue and earnings growth visibility led by a revival in volume growth, improving product mix and sustained price hikes, we believe the stock would command a premium to its peers. We value the stock at 36x its FY17E EPS of 24.8 to arrive at a target price of 92 per share with a HOLD recommendation. Exhibit 15: Valuations Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) (x) (%) (%) FY14 2748.3. 17.9. 48.6 41.5 118. 128.6 FY15E 317.5 1.1 2. 12. 43.4 35.3 19.2 124.1 FY16E 33311.1 1.4 2.8 3.9 41.8 31.5 11.1 125.4 FY17E 37397.9 12.3 24.8 19. 35.1 26.2 11.2 126.2 ICICI Securities Ltd Retail Equity Research Page 8
Company snapshot 9 Target Price 92 75 6 45 3 15 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-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-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 5% during January-March, 29 Oct-Dec, 29 Led by the slowdown in CY9, volume growth until Q3FY1 remains below 5% 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 15%, 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 (5-8% 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 75% from 52.5% 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 31-Mar-15 67.23 1,454.4. 2 Vontobel Asset Management, Inc. 31-Mar-15 1.44 31.2-3.7 3 BlackRock Institutional Trust Company, N.A. 3-Apr-15.92 19.9 1.5 4 Aberdeen Asset Management (Asia) Ltd. 31-Mar-15.91 19.6-1.3 5 The Vanguard Group, Inc. 31-Mar-15.87 18.9-1.9 6 Aberdeen Asset Managers Ltd. 31-Mar-15.28 6.1 -.8 7 Lyxor Asset Management 31-Mar-15.21 4.6.6 8 British Columbia Investment Management Corp. 31-Mar-14.18 3.9-1.7 9 APG Asset Management 31-Dec-13.16 3.6-2.2 1 Emerging Global Advisors, LLC 31-Mar-15.14 3.1 -.2 Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Dec-13 Mar-14 Sep-14 Dec-14 Mar-15 Promoter 67.25 67.25 67.2 67.2 67.2 FII 14.83 14.1 15.1 15. 15. DII 3.35 4.12 3.9 3.9 3.9 Others 14.57 14.39 13.8 13.9 13.9 Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares BlackRock Institutional Trust Company, N.A. 2.47m 1.53m Vontobel Asset Management, Inc. -51.89m -3.7m William Blair & Company, L.L.C. 18.23m 1.51m OppenheimerFunds, Inc. -5.74m -3.62m State Street Global Advisors (UK) Ltd. 11.9m.79m APG Asset Management -26.8m -2.24m JPMorgan Asset Management U.K. Limited 5.17m.38m The Vanguard Group, Inc. -2.72m -1.86m Dimensional Fund Advisors, L.P. 3.44m.37m British Columbia Investment Management Corp. -16.69m -1.65m ICICI Securities Ltd Retail Equity Research Page 9
Financial summary Profit and loss statement Crore (Year-end March) FY14 FY15E FY16E FY17E Total operating Income 2819.1 385.6 33977.3 38145.8 Growth (%) 8.7 9.9 1.3 12.3 Raw Material Expenses 14,343.6 15,623.6 17,128.9 18,781. Employee Expenses 1,436. 1,578.9 1,698.9 1,97.3 Marketing Expenses 3,613.6 3,874.9 4,463.7 5,86.1 Administrative Expenses 1,847.9. 2,65.3 2,318.7 Other expenses 2,32.8 4,52. 2,748.2 3,85.3 Total Operating Expenditure 23,543.9 25,597.4 28,14.9 31,178.4 EBITDA 4475.2 528.2 5872.4 6967.4 Growth (%) 11.8 16.4 12.8 18.6 Depreciation 26.6 286.7 289.1 29.3 Interest 36.... Other Income 621. 618.4 844.9 982.4 Exceptional Income 228.7 664.3.. PBT 5,28.4 6,24.2 6,428.2 7,659.5 Total Tax 1,16.9 1,872.2 1,928.4 2,35.5 PAT 3867.5 4332.1 4499.7 5354. Growth (%) 1.9 12. 3.9 19. EPS ( ) 17.9 2. 2.8 24.8 Cash flow statement Crore (Year-end March) FY14 FY15E FY16E FY17E Profit after Tax 3,867.5 4,332.1 4,499.7 5,354. Add: Depreciation 26.6 286.7 289.1 29.3 (Inc)/dec in Current Assets -769.4 1,143. -2,59.6 1,44.7 Inc/(dec) in CL and Provisions 948. -213.9 1,8.9 388.6 CF from operating activities 436.6 5547.9 381. 777.6 (Inc)/dec in Investments -88.1-4. -5. -25. (Inc)/dec in loans & advances -221.2 185.2-158.8 36.2 (Inc)/dec in Fixed Assets -493.6-3. -3. -2. Others 274.1... CF from investing activities -528.8-514.8-958.8-413.8 Issue/(Buy back) of Equity.... Inc/(dec) in loan funds.... Dividend paid & dividend tax -3,273. -3,643.6-4,13.6-4,515.3 Inc/(dec) in Sec. premium 4.1... Others 4.4... CF from financing activities -3264.5-3643.6-413.6-4515.3 Net Cash flow 513.3 1,389.5-1,162.3 2,148.4 Opening Cash 1,78.7 2,222. 3,611.5 2,449.2 Closing Cash 2222. 3611.5 2449.2 4597.6 Balance sheet Crore (Year-end March) FY14 FY15E FY16E FY17E Liabilities Equity Capital 216.3 216.3 216.3 216.3 Reserve and Surplus 3,6.7 3,749.2 4,235.3 5,74. Total Shareholders funds 3,277. 3,965.5 4,451.6 5,29.3 Other Non Current Liabilities 278.8 278.8 278.8 278.8 Long Term Provisions 838.7 838.7 838.7 838.7 Total Liabilities 4394.5 583. 5569.1 647.8 Assets Gross Block 4,138.8 4,438.8 4,738.8 4,938.8 Less: Acc Depreciation 1,741.9 2,28.6 2,317.7 2,68. Net Block 2,396.9 2,41.2 2,421.1 2,33.8 Capital WIP 312.1 312.1 312.1 312.1 Total Fixed Assets 2,79. 2,722.3 2,733.2 2,642.9 Net Intangible Assets 31.8 31.8 31.8 31.8 Other Investments 636.2 736.2 886.2 986.2 Liquid Investments 3 65 8 Inventory 2,747.5 3,23.9 3,184.5 3,372.9 Debtors 816.4 826.6 958.3 1,75.8 Loans and Advances 537.7 488.1 844.3 651.6 Investments & Other CA 71.9 19.1 9.8 133.6 Cash 2,222. 3,611.5 2,449.2 4,597.6 Total Current Assets 8,853.5 9,1. 9,997.3 11,11.1 Creditors 5,793.9 6,282.1 6,89.4 7,377.1 Provisions & other CL 2,81. 2,17.9 2,58.5 2,482.3 Total Current Liabilities 8,63.8 8,39. 9,47.8 9,859.4 Net Current Assets 249.6 71. 526.5 1,241.6 Others Non-Current Assets 767.2 582. 74.8 74.6 Application of Funds 4394.5 583. 5569.1 647.8 Key ratios (Year-end March) FY14 FY15E FY16E FY17E Per share data ( ) EPS 17.9 2. 2.8 24.8 Cash EPS 19.1 21.4 22.1 26.1 BV 15.2 18.3 2.6 24.5 DPS 13. 14.5 16. 18. Cash Per Share 1.3 16.7 11.3 21.3 Operating Ratios (%) EBITDA/Total Operating Income 16. 16.9 17.3 18.3 PBT Margin 18.3 2.6 19.3 2.5 PAT Margin 14.1 14.4 13.5 14.3 Inventory days 35 36 35 32 Debtor days 11 1 11 11 Creditor days 77 76 76 72 Return Ratios (%) RoE 118. 19.2 11.1 11.2 RoCE 128.6 124.1 125.4 126.2 RoA 88. 85.2 8.8 83.6 Valuation Ratios (x) P/E 48.6 43.4 41.8 35.1 EV / EBITDA 41.5 35.3 31.5 26.2 EV / Net Sales 6.8 6.1 5.5 4.9 Market Cap / Sales 6.9 6.2 5.6 5. Price to Book Value 57.3 47.4 42.2 35.5 Solvency Ratios Debt/EBITDA.... Debt / Equity.... Current Ratio 1. 1.1 1.1 1.1 Quick Ratio.8.7.8.7. ICICI Securities Ltd Retail Equity Research Page 1
ICICIdirect.com coverage universe (FMCG) CMP M Cap EPS ( ) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E Colgate (COLPAL) 2,9 1,919 Hold 25,526 41.3 47.9 54.9 5.6 4. 38.1 31.1 26.3 22.8 13.5 99.6 96.6 78.8 74.5 71.1 Dabur India (DABIND) 259 263 Hold 44,816 6.3 7.9 8.7 41.1 33.5 29.9 33. 25.4 23. 42.7 44.4 39.7 38.3 36.3 35.4 Hindustan Unilever (HINLEV) 878 92 Hold 198,95 2. 2.8 24.8 43.8 43.3 35.5 37.4 33.4 27.8 124.1 125.4 126.2 118. 19.2 11.1 ITC Limited (ITC) 328 387 Hold 28,748 11.9 12.4 14.1 27.7 31.1 23.2 2.2 19.6 18.2 43.7 44.3 46.5 33.5 32.8 33.7 Jyothy Lab (JYOLAB) 247 272 Hold 5,159 8.7 9.8 1.1 28.5 27.8 24.4 29.7 28. 25.6 12.1 12. 12.6 11.1 19.2 19.7 Marico (MARIN) 367 42 Buy 24,56 8.9 11.1 13.5 41.2 37.9 27.1 29.3 23.3 19.5 48.8 48.9 45.8 29. 35.9 33.6 Nestle (NESIND) 6,785 6,91 Hold 68,98 122.9 137.5 153.4 55.2 5.2 44.2 32.6 3. 26.9 67.6 7.7 75.4 47.2 45.3 48.9 Tata Global Bev (TATTEA) 141 182 Buy 1,8 6.2 7.8 8.7 22.8 23.2 16.3 13. 11.8 1.9 8.1 8.6 9. 8.2 6.3 7.6 VST Industries (VSTIND) 1,641 1,7 Hold 2,674 99.3 88.2 16.3 16.5 19.3 15.4 1.9 11.2 1. 59.3 52.5 6.3 45.8 43.2 37.5 ICICI Securities Ltd Retail Equity Research Page 11
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: >15%/2% for large caps/midcaps, respectively, with high conviction; Buy: >1%/15% 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 12
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