HOLD. Hindustan Unilever Limited FMCG RETAIL EQUITY RESEARCH. 2 nd August 2018 Q1FY19 RESULT UPDATE. CMP Rs. 1,733 TARGET Rs.

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Q1FY19 RESULT UPDATE Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 GEOJIT RESEARCH May-18 Jun-18 Jul-18 Aug-18 RETAIL EQUITY RESEARCH Hindustan Unilever Limited FMCG BSE CODE: 500696 NSE CODE: HINDUNILVR Bloomberg CODE: HUVR:IN SENSEX: 37,522 HOLD Rating as per Large cap 12months investment period CMP Rs. 1,733 TARGET Rs. 1,817 RETURN 5% 2 nd August 2018 Sanguine on all counts except valuation! Hindustan Unilever Limited (HUL), a subsidiary of Unilever Plc, is India's leading consumer products company. It has a dominant market share in categories like soaps, laundry, skin care, shampoos & tea. Revenue grew by stellar 16% YoY in Q1FY19, on a comparable basis, driven mainly by strong volume growth of 12% YoY. EBITDA margin came ahead of expectation, despite higher A&P spend, with 100 bps YoY expansion (on a comparable basis) in Q1FY19 to 23.7% led by higher gross margin and lower other overheads. As a result, we raise our EBITDA margin assumption by 106/83 bps YoY to 22.4%/23% for FY19E/20E. We factor strong revenue/pat CAGR of 13%/16% for FY18-21E led by demand recovery, sustained strong volume growth and operating leverage. While rural demand recovery, broad based growth across segments are some of the key positives, the current steep valuations of 50x FY20E and 43x FY21E offers limited upside. Hence, we downgrade the stock to HOLD from BUY with a revised rolled over TP of Rs. 1,817 at 48x FY21E EPS. Well-rounded performance Revenue grew by stellar 16% YoY in Q1FY19, on a comparable basis, driven largely by strong volume growth of 12% YoY (however on a low base). The growth was broad-based led by uptick in demand. EBITDA margin exceeded expectation with 100 bps YoY expansion (on a comparable basis) to 23.7%, despite higher A&P spend (up 27%YoY), led by higher gross margin and lower other overheads. Gross margin expanded by 197 bps YoY on the back of favourable mix, cost saving program and price increases taken by the company. Inline with strong operating performance, Adj. PAT registered a growth of 22.5% YoY in the quarter. Strong volume growth across segments The company posted double digit volume growth across segments. While volume growth in home care stood at 14%, Beauty & Personal care and Foods and Refreshment grew by 11% each. On topline, Home care segment witnessed 20% YoY increase led by strong growth across fabric wash and household care (vim, domex etc.). The management also highlighted that the premium laundry is performing extremely well and has grown 3x as compared to the mass category. Sustained growth in Dove and Pears in the Personal Wash segment and Pond s & Fair & lovely in the Skin Care segment resulted in 14% YoY growth in Beauty and Personal Care segment during the quarter. Hair care also supported the category growth led by premium portfolio and robust performance of Indulekha. Further, the company launched its first ever Naturale range of makeup under Lakme 9 to 5 range. Foods and refreshment segment also clocked robust growth of 14% YoY on the back of double digit growth across tea, Ice cream & frozen desserts and foods (Kissan & Knorr). Lever Ayush breakfast range was launched in Tamil Nadu in this quarter. Strong outlook Given demand recovery, new launches, thrust on Naturals space and continued investments behind brands, we expect strong volume growth to sustain for the company going forward. While higher crude oil prices and growing competitive intensity do pose some risks, we believe the company is well positioned to manage these risks given its strong competitive positioning, innovative pipeline and pricing power. Further, increasing premiumization, benefits of operating leverage and supply chain reorganization will aid in margin expansion. Hence, we expect Revenue/PAT CAGR of ~13/16% over FY18-21E. Outlook & Valuation We have increased our PAT estimates by ~6% for FY19E and FY20E mainly due to strong operating performance. While demand recovery, broad based growth across segments are some of the key positives, current steep valuations of 50x FY20E and 43x FY21E offers limited upside. Hence, we downgrade the stock to HOLD from BUY with a revised rolled over TP of Rs. 1,817 at 48x FY21E EPS. Company Data Market Cap (Rs cr) 374,956 Enterprise Value (Rs cr) 368,726 Outstanding Shares (cr) 216.4 Free Float 33% Dividend Yield 1.2% 52 week high Rs. 1,780 52 week low Rs. 1,144 6m average volume (cr) 0.1 Beta 0.8 Face value Rs. 1 Shareholding % Q3FY18 Q4FY18 Q1FY19 Promoters 67.2 67.2 67.2 FII s 12.9 12.6 12.2 MFs/Insti 6.2 6.8 7.2 Public 11.5 11.4 11.3 Others 2.2 2.0 2.0 Total 100.0 100.0 100.0 Price Performance 3mth 6mth 1 Year Absolute Return 19% 26% 48% Absolute Sensex 7% 7% 15% Relative Return* 12% 19% 33% *over or under performance to benchmark index 2,400 1,400 400 HUL Sensex (Rebased) Standalone (Rs.cr) FY19E FY20E FY21E Sales 39,267 44,313 49,739 Growth (%) 13.7% 12.9% 12.2% EBITDA 8,811 10,196 11,694 Margin(%) 22.4 23.0 23.5 PAT Adj 6,194 7,155 8,194 Growth (%) 16.9% 15.5% 14.5% Adj.EPS 28.6 33.1 37.9 Growth (%) 16.8% 15.5% 14.5% P/E 60.6 52.4 45.8 P/B 51.4 48.7 46.3 EV/EBITDA 42.1 36.3 31.6 RoE (%) 86.2 95.4 103.7 D/E 0.0 0.0 0.0

Quarterly Financials (Standalone) Profit & Loss Account (Rs cr) Q1FY19 Q1FY18 YoY Q4FY18 QoQ Sales 9,487 8,529 11.2 9,097 4.3 EBITDA 2,251 1,866 20.6 2,048 9.9 EBITDA Margin (%) 23.7 21.9 185 22.5 121 Depreciation 127 114 11.4 128 (0.8) EBIT 2,124 1,752 21.2 1,920 10.6 Interest 7 6 16.7 4 75.0 Other Income 135 113 19.5 100 35.0 Exceptional Items (59) (13) - (64) - PBT 2,193 1,846 18.8 1,952 12.3 Tax 664 563 17.9 601 10.5 PAT 1,529 1,283 19.2 1,351 13.2 Minority Interest - - - - - Reported PAT 1,529 1,283 19.2 1,351 13.2 Adjustment 59 13-64 - Adj PAT 1,588 1,296 22.5 1,415 12.2 No. of shares (cr) 216.4 216.4-216.4 - EPS (Rs) 7.3 6.0 22.5 6.5 12.2 Segment-wise Revenue (Rs cr) Q1FY19 Q1FY18* YoY Q4FY18 QoQ Home Care 3,146 2,837 10.9% 3,102 1.4 Beauty &Personal Care 4,407 4,067 8.4% 4,096 7.6 Foods and refreshments 1,785 1,540 15.9% 1,735 2.9 Refreshments - - - - - Others (includes Exports, Infant & Feminine Care. Etc.) 149 134 11.1% 164 (9.1) Total segment Revenue 9,487 8,577 10.6% 9,097 4.3 * Includes excise; hence not comparable Source: Company, Geojit Research Change in estimates Old estimates New estimates Change % Year / Rs cr FY19E FY20E FY19E FY20E FY19E FY20E Revenue 38,646 39,627 44,313 2.5 - EBITDA 8,262 8,811 10,196 6.6 - Margins (%) 21.4 22.4 23.0 100 bps - PAT 5,846 6,194 7,155 6.0 - EPS 21.4 22.4 33.1 4.7 -

Standalone Financials Profit & Loss Account Balance Sheet Sales 31,890 34,525 39,267 44,313 49,739 % change 2.7% 8.3% 13.7% 12.9% 12.2% EBITDA 6,047 7,276 8,811 10,196 11,694 % change 5.2% 20.3% 21.1% 15.7% 14.7% Depreciation 396 478 535 589 646 EBIT 5,651 6,798 8,276 9,608 11,048 Interest 22 20 20 20 20 Other Income 526 569 592 633 678 PBT 6,155 7,347 8,848 10,221 11,705 % change 3.0% 19.4% 20.4% 15.5% 14.5% Tax 1,906 2,048 2,654 3,066 3,512 Tax Rate (%) 31.0% 27.9% 30.0% 30.0% 30.0% Reported PAT 4,490 5,237 6,194 7,155 8,194 Adj* 241 (62) - - - Adj PAT 4,249 5,299 6,194 7,155 8,194 % change 1.9% 24.7% 16.9% 15.5% 14.5% No. of shares (cr) 216.4 216.4 216.4 216.4 216.4 Adj EPS (Rs) 19.6 24.5 28.6 33.1 37.9 % change 1.9% 24.7% 16.8% 15.5% 14.5% DPS (Rs) 17.0 20.0 23.0 26.0 30.0 Cash flow Cash 1,671 3,373 3,874 4,695 5,671 Accounts Receivable 928 1,147 1,301 1,468 1,648 Inventories 2,362 2,359 2,682 2,959 3,273 Other Cur. Assets 813 1,389 1,528 1,681 1,849 Investments 3,779 3,111 3,111 3,111 3,111 Gross Fixed Assets 4,712 5,267 5,897 6,497 7,097 Net Fixed Assets 4,024 4,142 4,237 4,249 4,203 CWIP 203 430 400 400 400 Intangible Assets - - - - - Def. Tax (Net) 160 255 255 255 255 Other Assets 811 943 943 943 943 Total Assets 14,751 17,149 18,332 19,761 21,352 Current Liabilities 7,202 8,636 9,599 10,626 11,815 Provisions - - - - - Debt Funds - - - - - Other Liabilities 1,059 1,438 1,438 1,438 1,438 Equity Capital 216 216 216 216 216 Reserves and Surplus 6,274 6,859 7,079 7,481 7,883 Shareholder s Fund 6,490 7,075 7,295 7,697 8,099 Total Liabilities 14,751 17,149 18,332 19,761 21,352 BVPS (Rs) 30.0 32.7 33.7 35.6 37.4 Ratios Pre-tax profit 6,155 7,347 8,848 10,221 11,705 Depreciation 396 478 535 589 646 Changes in W.C 538 819 347 430 527 Others (332) (347) (572) (613) (658) Tax paid (1,804) (2,210) (2,654) (3,066) (3,512) C.F.O 4,953 6,087 6,503 7,561 8,709 Capital exp. (1,024) (853) (600) (600) (600) Change in inv. (284) (897) - - - Other invest.cf 556 486 592 633 678 C.F - investing (752) (1,264) (8) 33 78 Issue of equity - - 0 - - Issue/repay debt - - - - - Dividends paid (4,264) (4,650) (5,974) (6,753) (7,792) Other finance.cf - - (20) (20) (20) C.F - Financing (4,264) (4,650) (5,994) (6,773) (7,812) Chg. in cash (63) 173 501 821 975 Closing cash 1,671 3,373 3,874 4,695 5,671 Y.E Mar. FY17 FY18 FY19E FY20E FY21E Profitab. & Return EBITDA margin (%) 19.0 21.1 22.4 23.0 23.5 EBIT margin (%) 17.7 19.7 21.1 21.7 22.2 Net profit mgn.(%) 13.3 15.3 15.8 16.1 16.5 ROE (%) 66.5 78.1 86.2 95.4 103.7 ROCE (%) 96.7 108.6 123.4 136.5 148.4 W.C & Liquidity Receivables (days) 10 12 12 12 12 Inventory (days) 44 42 42 42 41 Payables (days) 85 94 94 94 94 Current ratio (x) 0.8 1.0 1.0 1.0 1.1 Quick ratio (x) 0.5 0.7 0.7 0.7 0.8 Turnover &Levg. Gross asset T.O (x) 7.9 6.8 7.0 7.2 7.3 Total asset T.O (x) 2.2 2.1 2.2 2.3 2.4 Adj. debt/equity (x) 0.0 0.0 0.0 0.0 0.0 Valuation ratios EV/Net Sales (x) 11.9 11.0 9.5 8.4 7.4 EV/EBITDA (x) 61.7 51.1 42.1 36.3 31.6 P/E (x) 88.2 70.8 60.6 52.4 45.8 P/BV (x) 57.8 53.0 51.4 48.7 46.3

Recommendation Summary (last 3 years) Dates Rating Target 2200 30 July 2014 BUY 760 1700 1200 700 200 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 24 November 2014 BUY 800 21 January 2015 BUY 1000 27 April 2015 HOLD 950 22 July 2015 HOLD 930 19 January 2016 HOLD 890 13 May 2016 HOLD 830 17 November 2016 HOLD 849 27 January 2017 HOLD 858 29 May 2017 HOLD 1066 1 December 2017 BUY 1412 Source: Bloomberg, Geojit Research 2 August 2018 HOLD 1817 Investment Rating Criteria Large Cap Stocks; Buy - Upside is above 10%. Hold - Upside is between 0% - 10%. Reduce - Downside is more than 0%. Neutral - Not Applicable. Mid Cap and Small Cap; Buy - Upside is above 15%. Accumulate - Upside is between 10% - 15%. Hold - Upside is between 0% - 10%. Reduce/Sell - Downside is more than 0%. Neutral - Not Applicable. To satisfy regulatory requirements, we attribute Accumulate as Buy and Reduce as Sell. The recommendations are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return basis. It is possible that due to volatile price fluctuation in the near to medium term, there could be a temporary mismatch to rating. For reasons of valuations/return/lack of clarity/event we may revisit rating at appropriate time. Please note that the stock always carries the risk of being upgraded to BUY or downgraded to a HOLD, REDUCE or SELL. Neutral - The analyst has no investment opinion on the stock under review. Geojit Financial Services Limited has outsourced the preparation of this research report to DION Global Solutions Limited whose relevant disclosures are available hereunder. However, Geojit's research desk have reviewed this report for any untrue statement of material fact or any false or misleading information. General Disclosures and Disclaimers CERTIFICATION I, Abhijit Kumar Das, employee of Dion Global Solutions Limited (Dion) is engaged in preparation of this report and hereby certify that all the views expressed in this research report (report) reflect my personal views about any or all of the subject issuer or securities. Disclaimer This report has been prepared by Dion and the report & its contents are the exclusive property of the Dion and the client cannot tamper with the report or its contents in any manner and the said report, shall in no case, be further distributed to any third party for commercial use, with or without consideration. Geojit Financial Services Limited has outsourced the assignment of preparation of this report to Dion. Recipient shall not further distribute the report to a third party for a commercial consideration as this report is being furnished to the recipient solely for the purpose of information. Dion has taken steps to ensure that facts in this report are based on reliable information but cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this report. It is hereby confirmed that wherever Dion has employed a rating system in this report, the rating system has been clearly defined including the time horizon and benchmarks on which the rating is based. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this report is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. Dion has not taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. This report is not to be relied upon in substitution for the exercise of independent judgment. Opinions or estimates expressed are current opinions as of the original publication date appearing on this report and the information, including the opinions and estimates contained herein, are subject to change without notice. Dion is under no duty to update this report from time to time. Dion or its associates including employees engaged in preparation of this report and its directors do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of securities, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. The investments or services contained or referred to in this report may not be suitable for all equally and it is recommended that an independent investment advisor be consulted. In addition, nothing in this report constitutes investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable or appropriate to individual circumstances or otherwise constitutes a personal recommendation of Dion.

REGULATORY DISCLOSURES: Dion is engaged in the business of developing software solutions for the global financial services industry across the entire transaction lifecycle and interalia provides research and information services essential for business intelligence to global companies and financial institutions. Dion is listed on BSE Limited (BSE) and is also registered under the SEBI (Research Analyst) Regulations, 2014 (SEBI Regulations) as a Research Analyst vide Registration No. INH100002771. Dion s activities were neither suspended nor has it defaulted with requirements under the Listing Agreement and / or SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with the BSE in the last five years. Dion has not been debarred from doing business by BSE / SEBI or any other authority. In the context of the SEBI Regulations, we affirm that we are a SEBI registered Research Analyst and in the course of our business, we issue research reports /research analysis etc that are prepared by our Research Analysts. We also affirm and undertake that no disciplinary action has been taken against us or our Analysts in connection with our business activities. In compliance with the above mentioned SEBI Regulations, the following additional disclosures are also provided which may be considered by the reader before making an investment decision: 1. Disclosures regarding Ownership Dion confirms that: (i) It/its associates have no financial interest or any other material conflict in relation to the subject company (ies) covered herein at the time of publication of this report. (ii) It/its associates have no actual / beneficial ownership of 1% or more securities of the subject company (ies) covered herein at the end of the month immediately preceding the date of publication of this report. Further, the Research Analyst confirms that: (i) He, his associates and his relatives have no financial interest in the subject company (ies) covered herein, and they have no other material conflict in the subject company at the time of publication of this report. (ii) He, his associates and his relatives have no actual/beneficial ownership of 1% or more securities of the subject company (ies) covered herein at the end of the month immediately preceding the date of publication of this report. 2. Disclosures regarding Compensation: During the past 12 months, Dion or its Associates: (a) Have not managed or co-managed public offering of securities for the subject company (b) Have not received any compensation for investment banking or merchant banking or brokerage services from the subject company (c) Have not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject (d) Have not received any compensation or other benefits from the subject company or third party in connection with this report. 3. Disclosure regarding the Research Analyst s connection with the subject company: It is affirmed that I, Abhijit Kumar Das employed as Research Analyst by Dion and engaged in the preparation of this report have not served as an officer, director or employee of the subject company 4. Disclosure regarding Market Making activity: Neither Dion /its Research Analysts have engaged in market making activities for the subject company. Copyright in this report vests exclusively with Dion. Please ensure that you have read the Risk Disclosure Documents for Capital Market and Derivatives Segments as prescribed by the Securities and Exchange Board of India before investing. Geojit Financial Services Ltd. (formerly known as Geojit BNP Paribas Financial Services Ltd.), Registered Office: 34/659-P, Civil Line Road, Padivattom, Kochi-682024, Kerala, India. Phone: +91 484-2901000, Website: www.geojit.com. For investor queries: customercare@geojit.com, For grievances: grievances@geojit.com, For compliance officer: compliance@geojit.com. Corporate Identity Number: L67120KL1994PLC008403, SEBI Stock Broker Registration No INZ000104737, Research Entity SEBI Reg No: INH200000345, Investment Adviser SEBI Reg No: INA200002817, Portfolio Manager: INP000003203, Depository Participant: IN-DP-325-2017, ARN Regn.Nos:0098, IRDA Corporate Agent (Composite) No.: CA0226