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Edelweiss Securities Limited

Our recent interaction with the Hindustan Unilever (HUL) management

reaffirms our view that growth pace in discretionary categories (personal

products, ice creams) continues to moderate. We expect volume growth

to be tepid in Q2FY14 as well. In H2FY14, HUL’s volume growth is likely to

benefit from low base (5% and 6% YoY in Q3FY13 and Q4FY13,

respectively) and likely surge in rural spending owing to good monsoon

and impending elections. Implementation of the Food Security Bill will

further propel rural demand over the long term. Maintain ‘HOLD’.

Discretionary demand waning; heavier wallets to spur rural growth

HUL's discretionary category is facing slowdown and premium offerings are now

growing at par with category, unlike the superior pace earlier. Rural demand continues

to outpace urban primarily due to the company’s robust distribution network. Though

some respite in food inflation is inevitable due to good monsoon, diesel inflation is

likely to negate its impact to some extent. Good monsoon and forthcoming elections

augur well for rural disposable incomes.

Heightening competitive intensity in oral care, detergents

Competitive intensity has intensified post entry of Procter & Gamble (P&G) in the oral

care space. HUL has stepped up aggression and will continue to defend its position in

the space. In soaps, the company has unwound promotional offers and has taken

select price hikes to counter INR depreciation impact on palm oil prices; we expect

peers to follow suit. Competitive intensity in detergents has risen. Fair & Lovely (FAL)

has been re-launched recently with changes in packaging and cream color (back to

white from pink), though the price has been maintained.

Outlook and valuations: Cautious; maintain ‘HOLD’

We remain positive on HUL from a long-term perspective. However, slowdown in

discretionary segment remains an overhang. At CMP, the stock is trading at 38.5x

FY14E and 34.6x FY15E EPS. We maintain ‘HOLD’ recommendation and rate it ‘Sector

Underperformer’. We maintain target multiple at 34x FY15E EPS; TP of INR633.

VISIT NOTE

HINDUSTAN UNILEVER Near-term pain, long-term robust

EDELWEISS 4D RATINGS

Absolute Rating HOLD

Rating Relative to Sector Underperformer

Risk Rating Relative to Sector Low

Sector Relative to Market Overweight

MARKET DATA (R: HLL.BO, B: HUVR IN)

CMP : INR 642

Target Price : INR 633

52-week range (INR) : 725 / 432

Share in issue (mn) : 2,162.6

M cap (INR bn/USD mn) : 1,389 / 21,938

Avg. Daily Vol.BSE/NSE(‘000) : 2,866.1

SHARE HOLDING PATTERN (%)

Current Q4FY13 Q3FY13

Promoters *

52.5 52.5 52.5

MF's, FI's & BK’s 7.1 8.1 8.5

FII's 20.2 22.1 21.7

Others 20.2 17.3 17.3

* Promoters pledged shares

(% of share in issue)

: NIL

PRICE PERFORMANCE (%)

Stock Nifty

EW Consumer

Goods Index

1 month 7.2 7.1 9.2

3 months 7.8 1.5 16.8

12 months 22.4 5.3 40.8

Abneesh Roy

+91 22 6620 3141

[email protected]

Pooja Lath

+91 22 6620 3075

[email protected]

India Equity Research| Consumer Goods

September 18, 2013

Financials

Year to March FY12 FY13 FY14E FY15E

Revenues (INR mn) 229,877 263,172 289,357 326,097

Rev. growth (%) 17.0 14.5 10.0 12.7

EBITDA (INR mn) 34,836 42,053 46,477 52,860

Net profit (INR mn) 27,907 38,290 37,455 40,170

Shares outstanding (mn) 2,162 2,163 2,163 2,163

Diluted EPS (INR) 12.4 15.6 16.7 18.6

EPS growth (%) 30.3 26.0 7.0 11.2

Diluted P/E (x) 51.9 41.2 38.5 34.6

EV/EBITDA (x) 38.6 32.1 28.9 25.2

ROAE (%) 83.4 103.1 105.4 87.5

Consumer Goods

2 Edelweiss Securities Limited

Key management meet takeaways

Pricing action: Pricing action largely depends on raw material prices/forex fluctuation. Any

sudden, sharp movement in INR and crude compels price increase as it impacts PFAD (palm

oil fatty acid derivative), LAB, soda ash, packaging, freight and power costs. Soaps &

detergents (S&D) category is likely to see increased pricing action.

HUL’s pricing strategy is to keep the price hike below inflation as some internal cost

efficiencies compensate for the difference. Prices are always increased in a calibrated

manner. HUL is committed to remain competitive even if it impacts margin in near term.

Demand: Demand remains moderate with discretionary facing slowdown pressure. In

discretionary categories, rate of growth continues to remain tardy and quality of growth is

also getting impacted (premium offerings are now growing at pace with category, unlike

superior pace earlier).

Rural growth continues to outstrip the urban counterpart; as per Nielsen, though the

growth rate in both rural and urban is moderating at same levels. However, in case of HUL,

rural continues to outperform urban primarily due to the company’s robust distribution

network. Good monsoon augurs well as it will increase rural disposable incomes. Though

food inflation is likely to see some respite due to good monsoon, fuel inflation will negate its

impact to some extent.

Soaps: HUL has unwound promotional offers and taken select price hikes in soaps post

Q1FY14 to counter INR depreciation impact on palm oil prices.

Detergents: Competitive intensity in the space has risen significantly especially with respect

to promotions in the recent times.

Personal care: Market volume growth for skin category has slowed down from mid-teen in

Q1FY13 to flattish in Q1FY14 as disposable incomes are getting squeezed (fair amount

locked in fixed commitments like loan repayments further impacted by food inflation). Fresh

uptrading has moderated; in some categories, mass products are growing well, but there no

apparent signs of significant down trading.

Oral care: Competition has intensified post entry of P&G. HUL has stepped up aggression

and will continue to defend its position in the space.

Skin care: Fair & Lovely has been recently re-launched with a change in packaging and

colour of the cream (back to white from pink), though price has been maintained.

Overall skin care products consumption in India is low (China per capita consumption is 10x

India’s); increase in consumption combined with higher penetration will drive category

growth over the long term. Most products have been restaged with a single brand extended

to various products (example: Ponds, which was synonymous with cold cream earlier, has

been extended to face wash, whitening cream, anti-ageing cream, etc) to exploit growing

affinity for beauty products as disposable incomes are rising.

Hair care: Conditioners have not grown as expected. In developed markets, 60-70%

consumers purchase conditioners along with shampoo.

Hindustan Unilever


TRESemmé was priced in line with Dove, but at an indirect discount (more grammage

offered at similar price) and positioned to deliver salon-like experience at home. It has been

well received and is doing particularly well in modern trade.

HUL will soon launch TIGI hair care brand targeting premium salons. The product will be

imported and HUL will create a separate channel with some level of leveraging from existing

channels.

Packaged foods: Soupy noodles received good response post re-launch, though more action

can be taken as the product has scope for faster and better growth. HUL does not intend to

vacate this space.

A&P: A&P spends are budgeted to maintain Share of Voice (SoV) depending on competitive

intensity. In 2010, ad spends had reduced from 13% of sales to 11% as category heat had

dipped. Recently, ad spends have been high as initial months of launches (both by self and

competition) require brand push. Oral care A&P spends are not likely to swing the needle

significantly.

TRAI recommendation on 12 minute ad cap per hour, if implemented, will reduce ad

inventory stock and lead to increase in ad rates depending on total GRPs of particular

channels. HUL will keep SoV constant and may benefit due to scale.

In our view; smaller players may not get adequate space due to fall in inventory.

HUL has been evaluating other media sources than TV like wall paintings, digital, etc.

However, TV will continue to corner a large share of ad spends with non-TV component

slowing picking. Though TV continues to be a popular advertising media, other media

segments are also gaining ground.

Food Security Bill: Though benefit will flow in only when effectively implemented, it is a

positive move as affluence and affordability will boost discretionary spending.

Inflation: Steady inflation bodes well for HUL, but volatility and sharp inflation hurts growth.

There are no signs of pressure on unorgainsed / regional players due to inflation, though the

same has been observed during past inflationary periods.

Segmental growth: HUL continues to grow competitively, ahead of market growth with

soaps, premium detergents, hair care, tea (robust price led growth owing to marketing

interventions in most brands), packaged foods (double digit growth in Kissan) doing well.

Some categories like mass detergents, ice creams (a drag for packaged foods), Clear, coffee

(growth was price led which has now anniversarised and competitive heat has increased)

are facing challenging times.

Consumer Goods


Other key developments

Sanjiv Mehta takes over as CEO

Mr. Nitin Paranjpe has been promoted as the head of home care business of Unilever and

will directly report to Mr. Paul Polman. He will be replaced by Mr. Sanjiv Mehta, current

Chairman at Middle East and North Africa; his earlier stints at Unilever include Chairman

and CEO at Unilever Philippines, Chairman and Managing Director at Unilever Bangladesh,

Commercial Director at Unilever Bangladesh, Group Commercial Manager & Commercial

Head HPC at Unilever Arabia. He is a CA and has done MBA from Harvard Business School.

Oral care ad fight

Competitive intensity in the oral care space has heated up with the entry of a new player,

P&G. HUL had recently launched a comparative advertisement targeting Colgate in the mass

segment. With advertisement for a relaunched Pepsodent Germicheck claiming "130%

superiority" in terms of germ attack power over "Colgate Strong Teeth, at four hours after

brushing". However, the Delhi High Court overruled Colgate’s petition against HUL as the

claim was not found to be denigrating, slandering or rubbishing the competitor.

Later, Colgate was pulled up by the Advertising Standards Council of India (ASCI) for its

Colgate Strong Teeth television commercial, which claimed to provide "100% guarantee in

anti-cavity protection" on a complaint filed by HUL. ASCI asked Colgate to modify or

withdraw the ad since the claims were unsubstantiated. ASCI also noted that an IDA seal on

the toothpaste pack was misleading as the certification was meant for another variant,

Colgate Super Shakti. HUL's complaint against the claim that "Colgate is the No. 1 brand

recommended by dentists" was not upheld by ASCI.

Price hike summary

The consumer pack’s pricing action in September (compared against June prices) can be

summarised as follows:

Toothpaste

• Closeup menthol toothpaste (HUL) increased price of its 150g pack by 2.4%

• Cibaca (Colgate) took a price increase of 5.3% in its 175g pack.

• Colgate Active Salt (Colgate) increased the price of its 100g pack by 4.8%.

• Colgate Max Fresh (Colgate) took a price hike of 4.8% in its 80g pack.

• Sensodyne Rapid Relief has increased the price of its 80g pack by 9.1%, but is also

offering a Sensodyne brush worth INR40 free.

Detergents and bars

• Surf Excel Quick Wash (HUL) has increased its price by 1.7% of its 1kg pack.

• Rin Detergent (HUL) has increased price of 1kg pack by 5.4% and is offering INR10 Rin

Bar free.

• Surf Excel Matic (HUL) has increased the price of 1kg pack by 6.5%.

• Wheel Bar Blue (HUL) has reduced its grammage by 20gms to 215gms, leading to an

effective price increase of 9.3%.

Hindustan Unilever


Soaps

• Dove Moisturising soap (HUL) increased its price of 75g pack by 4.8%.

• Pears Oil Clear (HUL) increased the price of 125g pack by 8%.

• Lux Creamy White (HUL) increased prices by 4.2% of the 75g pack.

• Lifebuoy (HUL) took price hike of 4.8% on the 125g pack.

• Dettol Original Soap (Reckitt Benckiser) took price hike of 5.7% in its 125g pack.

• Hamam (HUL) took price hike of 8.7% in its 100g pack.

Skin care

• Lakme peach milk moisturiser (HUL) increased price of 120ml pack by 12.9%.

• Ponds Dreamflower talc (HUL) increased the price of 400g pack by 8%.

Shampoos

• Clinic plus (HUL) took a price hike of 4.3%.

• All Clear (HUL) reduced grammage by 10g to 80ml, leading to an effective price increase

of 12.5%.

• Pantene Pro V (P&G) cut price of its 80ml pack by 4.8%.

• Head & Shoulders (P&G) took price hike of 11.3% on its 80ml pack.

• L’Oreal total repair took price hike of 16.9% in 90ml pack.

• Garnier Fructis reduced prices by 7.2% on the 100ml bottle.

Noodles and ketchup

• Yippie Noodles (ITC) cut grammage by 5gm, leading to effective price increase of 6.7%.

• Ketchup Kissan (HUL) took price hike of 7.1% on 1kg bottle.

• Ketchup Squeeze (HUL) took price hike of 10% on 1kg pack.

• Hienz tomato ketchup hiked price 8% on 1kg pack.

• Maggi Tomato Ketchup (Nestle) is offering INR12 off on its 1kg pack, leading to price cut

of 10%.

Tea & coffee

• Wagh Bakri raised prices on 500g pack of 3.2%.

• Tata Tea Agni (Tata Global) took a price hike of 3.1% on 500g pack.

• Brooke Bond Red label (HUL) is giving INR20 off on 500gm pack, leading to a price

decline of 4%.

Consumer Goods


Chart 1: Overall volume growth facing discretionary slowdown pressure

Chart 2: A&P as percentage of sales increased YoY

Chart 3: Palm oil price correction boosts gross margin

Source: Company, Edelweiss research

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Hindustan Unilever


Soaps and

Detergents

39%Personal

Products

48%

Beverages

10%

Packaged

Food

3%

Others

(includes

Chemicals,

Water etc)

0%

Q1FY13 - EBIT contribution

Chart 4: Category-wise contribution—Sales

Chart 5: Category-wise contribution—EBIT

Chart 6: S&D YoY revenue growth Chart 7: S&D margin expands YoY


Soaps and

Detergents

50%

Personal

Products

28%

Beverages

11%

Packaged

Food

7%

Others

(includes

Chemicals,

Water etc)

4%

Q1FY14 revenues

Soaps and

Detergents

40%

Personal

Products

43%

Beverages

13%

Packaged

Food

4%

Others

(includes

Chemicals,

Water etc)

0%

Q1FY14 - EBIT contribution

(5.0)

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Consumer Goods


Chart 8: PP margin contracted YoY Chart 9: PP revenue growth lost pace

Chart 10: Beverages sales growth robust Chart 11: Beverages margin improved YoY

Chart 12: Packaged food sales growth slowed down Chart 13: Packaged food margin highest in 14 quarters


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Hindustan Unilever


Table 1: Segmental performance


Chart 14: Palm oil prices correct sharply, move up a bit


Year to March - Revenues (INR mn) Q1FY14 Q1FY13 YoY growth Q4FY13 QoQ growth

Soaps and Detergents 34,077 31,631 7.7 31,914 6.8

Personal products 18,834 18,471 2.0 18,311 2.9

Beverages 7,574 6,541 15.8 8,081 (6.3)

Packaged food 4,579 4,370 4.8 3,723 23.0

Others (includes chemicals, water etc) 2,791 2,640 5.7 2,502 11.5

Segment results (Profit/(Loss) before tax and interest)

Soaps and Detergents 4,393 3,852 14.0 3,830 14.7

Personal products 4,682 4,757 (1.6) 4,717 (0.8)

Beverages 1,387 950 46.1 1,362 1.8

Packaged food 384 248 54.9 140 174.8

Others (includes chemicals, water etc) (31) (43) NM (181) NM

Segment margins

Year to March - Margin (%) Q1FY14 Q1FY13 YoY growth Q4FY13 QoQ growth

Soaps and Detergents 12.9 12.2 71 12.0 89

Personal products 24.9 25.8 (90) 25.8 (90)

Beverages 18.3 14.5 379 16.9 146

Packaged food 8.4 5.7 271 3.8 463

Others (includes chemicals, water etc) (1.1) (1.6) NM (7.2) NM

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Consumer Goods


Outlook and valuations: Cautious; maintain ‘HOLD’

We like HUL’s strategy of investing in categories that will pay rich dividends from a three-

five year perspective and focus on new product launches and market share gains in existing

categories. We expect tepid volume growth led by slowdown in discretionary products

despite low base (5% and 6% YoY in Q3FY13 and Q4FY13, respectively) in the coming two

quarters. We expect HUL to further hike price in lieu of INR depreciation and increase in

fuel costs. We maintain our target P/E multiple at 34x for FY15E, arriving at a target price of

INR633. We maintain ‘HOLD’ on the stock and rate it ‘Sector Underperformer’ on a relative

return basis.

Chart 15: 1 year forward P/E chart


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Hindustan Unilever


Company Description

HUL, the largest FMCG Company in India, was formed by merging three subsidiaries of

Unilever in 1956. At present, Unilever Plc holds a 67.3% stake in the company. HUL’s

portfolio of products covers a wide spectrum including soaps, detergents, skin creams,

shampoos, toothpastes, tea, coffee, packaged foods and branded atta.

Powerful brands and an envious distribution network are HUL’s primary strengths. The

company operates through segments—soaps & detergents, personal products, beverages,

foods, exports, and other operations.

Investment Theme

HUL is a play on consumption growth in India. The company has displayed its ability to effect

price hikes and avoid impact of inflation in vegetable oils, which, combined with improved

outlook for fabric wash and strong growth in processed foods and beverages, boosts our

positive outlook on the stock. The recent moves by the company to dispose of its non-core

assets including few properties give it a near term upside. We like its revenue growth from a

medium to long term perspective, however increase in royalty, steep hike in tax rate and

slowdown in discretionary segments remains an overhang. Post partial success of Unilever’s

open offer to raise its stake in HUL the parent’s stake stands at 67.3% of the total

shareholding.

Key Risks

Depreciation in rupee impacts price of imported raw materials.

A rise in crude oil prices can impact packaging costs and indirectly / directly impact palm oil

and LAB prices.

Increase in palm oil prices may lead to gross margin contraction.

The price war in HUL’s popular segments with new entrants entering the fray could hit the

company hard.


Consumer Goods

Financial Statements

Income statement (INR mn)


Net revenue 229,877 263,172 289,357 326,097

Other Operating Income 4,486 6,868 8,105 9,564

Total operating income 234,363 270,040 297,462 335,660

Materials costs 125,017 140,871 152,793 172,368

Gross profit 109,347 129,169 144,669 163,293

Employee costs 12,009 14,127 15,498 17,454

Other Expenses 35,532 40,089 45,809 51,692

Advertisement & sales costs 26,970 32,900 36,885 41,286

EBITDA 34,836 42,053 46,477 52,860

Depreciation & Amortization 2,335 2,513 2,739 3,005

EBIT 32,500 39,540 43,738 49,856

Other income 2,596 5,320 5,399 5,577

Interest expenses 17 257 200 250

Profit before tax 35,080 44,603 48,937 55,183

Provision for tax 8,215 10,752 12,724 14,899

Net profit 26,865 33,851 36,213 40,284

Exceptional items 1,137 4,543 1,342 -

Minority interest (95) (104) (100) (113)

Profit after minority interest 27,907 38,290 37,455 40,170

Diluted EPS (INR) 12.4 15.6 16.7 18.6

Dividend per share (INR) 7.5 18.5 10.4 11.1

Dividend payout (%) 58.1 104.5 60.0 60.0

Common size metrics


Materials costs 54.4 53.5 52.8 52.9

Employee expenses 5.2 5.4 5.4 5.4

Advertising & sales costs 11.7 12.5 12.7 12.7

EBITDA margins 15.2 16.0 16.1 16.2

Net profit margins 11.6 12.8 12.5 12.3

Growth ratios (%)


Revenues 17.0 14.5 10.0 12.7

EBITDA 28.5 20.7 10.5 13.7

Net profit 28.8 26.0 7.0 11.2

EPS 30.3 26.0 7.0 11.2

Key Assumptions


Macro

GDP(Y-o-Y %) 6.2 5.0 4.8 6.0

Inflation (Avg) 8.9 7.4 5.2 6.0

Repo rate (exit rate) 8.5 7.5 6.8 6.0

USD/INR (Avg) 48.0 54.5 62.0 60.0

Company

Revenue growth (Y-o-Y %)

Volume gr. (overall) 9.0 7.0 5.5 6.5

Pricing gr. (overall) 8.0 7.5 4.5 6.2

Growth in Soaps 9.2 24.6 10.0 13.0

Growth in Detergents 29.2 13.1 13.0 16.0

Growth in PP 19.7 7.3 7.0 9.0

Growth in beverages 11.5 13.6 16.0 17.0

Growth in packaged foods 15.4 10.8 7.0 9.0

EBITDA margin assumptions

EBITDA margin (%) 15.2 16.0 16.1 16.2

Oils, fats and resins as % of COGS 11.2 11.5 11.7 11.7

Chemicals and perfumes as % of COGS 29.1 32.7 30.0 30.5

Tea and Green leaf as % of COGS 7.4 8.4 6.9 6.6

Selling and distribution costs 15.2 14.8 15.4 15.4

A&P as % of sales 11.7 12.5 12.7 12.7

Employee cost as % of sales 5.2 5.4 5.4 5.4

Financial assumptions

Tax rate (%) 22.7 24.1 26.0 27.0

Capex (INR mn) 2,070 3,566 4,776 4,650

Debtor days 14 13 14 14

Inventory days 81 70 75 75

Payable days 145 132 140 140

Cash conversion cycle (days) (50) (50) (51) (51)

Depreciation as % of gross block 5.9 5.9 5.9 5.9

Yield on cash 6.0 12.8 13.0 11.1


Hindustan Unilever

Peer comparison valuation

Market cap Diluted PE (X) EV/EBITDA (X) ROAE (%)

Name (USD mn) FY14E FY15E FY14E FY15E FY14E FY15E

Hindustan Unilever 21,938 38.5 34.6 28.9 25.2 105.4 87.5

Asian Paints 6,750 32.7 26.0 20.4 17.0 35.0 36.3

Colgate 2,613 30.0 25.9 21.4 18.2 114.9 105.1

Dabur 4,651 31.7 25.9 23.8 19.1 38.8 37.7

GlaxoSmithKline Consumer Healthcare 2,880 35.9 30.6 24.7 20.9 34.0 33.3

Godrej Consumer 4,489 35.2 28.9 25.0 20.3 20.6 21.6

ITC 42,962 30.4 25.5 19.8 16.5 36.4 38.8

Marico 2,259 29.4 23.4 19.3 15.3 22.1 22.9

Nestle Ltd 7,644 39.4 32.3 22.7 19.1 57.7 53.3

AVERAGE 33.2 27.7 23.1 19.2 51.1 48.3

Source: Edelweiss research

Cash flow metrics


Operating cash flow 29,108 34,948 38,560 45,559

Investing cash flow (5,143) 631 (4,776) (4,650)

Financing cash flow (17,256) (41,474) (25,069) (28,362)

Net cash flow 6,709 (5,896) 8,715 12,548

Capex (2,070) (3,566) (4,776) (4,650)

Dividends paid (18,839) (46,654) (26,211) (28,112)

Profitability & efficiency ratios


ROAE (%) 83.4 103.1 105.4 87.5

ROACE (%) 257.8 489.1 430.2 227.4

Inventory day 81 70 75 75

Debtors days 14 13 14 14

Payable days 145 132 140 140

Cash conversion cycle (days) (50) (50) (51) (51)

Current ratio 0.8 0.8 0.9 1.0

Operating ratios


Total asset turnover 7.6 8.5 8.9 7.3

Fixed asset turnover 9.2 10.2 10.5 11.1

Equity turnover 7.2 8.0 8.4 7.1

Valuation parameters


Diluted EPS (INR) 12.4 15.6 16.7 18.6

Y-o-Y growth (%) 30.3 26.0 7.0 11.2

CEPS (INR) 13.5 16.8 18.0 20.0

Diluted P/E (x) 51.9 41.2 38.5 34.6

Price/BV (x) 39.8 51.4 36.2 27.5

EV/Sales (x) 5.9 5.1 4.6 4.1

EV/EBITDA (x) 38.6 32.1 28.9 25.2

Dividend yield (%) 1.2 2.9 1.6 1.7

Balance sheet (INR mn)

As on 31st March FY12 FY13 FY14E FY15E

Equity capital 2,162 2,163 2,163 2,163

Reserves & surplus 34,649 26,485 37,729 49,788

Shareholders funds 36,811 28,648 39,891 51,950

Minority interest (BS) 183 209 309 422

Borrowings - 247 247 247

Deferred tax liability (2,099) (2,085) (2,085) (2,085)

Sources of funds 34,895 27,019 38,362 50,534

Tangible assets 22,329 23,953 25,714 27,209

Intangible assets 300 361 361 361

CWIP (incl. intangible) 2,276 2,224 2,500 2,650

Total net fixed assets 24,905 26,539 28,575 30,220

Non current investments 703 3,953 3,953 3,953

Current Investments 22,519 18,570 18,570 18,570

Cash and equivalents 19,964 19,007 27,722 40,270

Inventories 26,674 27,060 31,396 35,418

Sundry debtors 8,567 9,965 11,409 12,875

Loans and advances 8,269 10,036 10,036 10,036

Other current assets 372 3,703 3,703 3,703

Total current assets (ex cash) 43,883 50,764 56,544 62,032

Trade payable 48,439 53,417 58,605 66,114

Others current liabilities 28,640 38,397 38,397 38,397

Total current liabilities & 77,079 91,815 97,003 104,511

Net current assets (ex cash) (33,196) (41,051) (40,458) (42,479)

Uses of funds 34,895 27,019 38,362 50,534

Book value per share (INR) 16.1 12.5 17.7 23.4

Free cash flow (INR mn)


Net profit 27,907 38,290 37,455 40,170

Add : Non cash charge 405 (6,537) 1,697 3,368

Gross cash flow 28,311 31,753 39,152 43,538

Less: Changes in WC (797) (3,195) 592 (2,021)

Operating cash flow 29,108 34,948 38,560 45,559

Less: Capex 2,070 3,566 4,776 4,650

Free cash flow 27,038 31,382 33,784 40,909


Consumer Goods

Top 10 holdings

Perc. Holding Perc. Holding

Aberdeen Asset Management Plc 3.11 Life Insurance Corp Of India 2.89

Oppenheimerfunds Incorporated 1.77 Harris Trust & Savings Bank 1.44

Virtus Emerging Markets 1.40 Vontobel Asset Management AG 0.95

Vanguard Group Inc 0.83 Commonwealth Bank Of Austr 0.30

UTI Asset Management Co Ltd 0.26 HDFC Asset Management Co Ltd 0.21

*as per last available data

Insider Trades

Reporting Data Acquired / Seller B/S Qty Traded

No Data Available

*in last one year

Bulk Deals Data Acquired / Seller B/S Qty Traded Price

No Data Available

*in last one year

Additional Data

Directors Data

Mr. Harish Manwani Chairman Mr. Nitin Paranjpe Managing Director and Chief Executive Officer

Mr. Sridhar Ramamurthy Executive Director, Finance & IT and Chief Financial Officer Mr. Pradeep Banerjee Executive Director, Supply Chain

Mr. A. Narayan Independent Director Mr. S. Ramadorai Independent Director

Mr. R. A. Mashelkar Independent Director Mr. O. P. Bhatt Independent Director

Dr. Sanjiv Misra Independent Director

Auditors - M/s. Lovelock & Lewes

*as per last annual report


Company Absolute

reco

Relative

reco

Relative

risk

Company Absolute

reco

Relative

reco

Relative

Risk

Asian Paints BUY SP M Bajaj Corp BUY SP M

Colgate HOLD SP M Dabur BUY SO M

Emami BUY SP H GlaxoSmithKline Consumer

Healthcare

HOLD SP M

Godrej Consumer BUY SO H Hindustan Unilever HOLD SU L

ITC BUY SO L Marico BUY SO M

Nestle Ltd HOLD SP L United Spirits BUY SO H

RATING & INTERPRETATION

ABSOLUTE RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING

Ratings Criteria

Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe

within the sector

RELATIVE RISK RATING

Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Ratings Criteria

Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return


Consumer Goods

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.

Board: (91-22) 4009 4400, Email: [email protected]

Vikas Khemani Head Institutional Equities [email protected] +91 22 2286 4206

Nischal Maheshwari Co-Head Institutional Equities & Head Research [email protected] +91 22 4063 5476

Nirav Sheth Head Sales [email protected] +91 22 4040 7499

Coverage group(s) of stocks by primary analyst(s): Consumer Goods

Asian Paints, Bajaj Corp, Colgate, Dabur, Godrej Consumer , Emami, Hindustan Unilever, ITC, Marico, Nestle Ltd, GlaxoSmithKline Consumer Healthcare,

United Spirits

Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 127 44 8 180

* 1 stocks under review

Market Cap (INR) 112 54 14

Date Company Title Price (INR) Recos

Recent Research

19-Sep-13 Asian

Paints

Blooms amid gloom;

Company Update

446 Buy

28-Aug-13 Godrej

Consumer

Products

Poised to scale growth terrain;

Visit Note

806 Buy

22-Aug-13 Consumer

Goods

Slower sales; improving

margin; Result Review

> 50bn Between 10bn and 50 bn < 10bn

Buy Hold Reduce Total

Rating Interpretation

Buy appreciate more than 15% over a 12-month period

Hold appreciate up to 15% over a 12-month period

Reduce depreciate more than 5% over a 12-month period

Rating Expected to


Hindustan Unilever

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Consumer Goods

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