Thursday, December 29, 2011

>HINDUSTAN UNILEVER LIMITED: Premiumisation in urban and rural penetration are two biggest opportunities

 Strong Portfolio of Brands covering the entire consumer pyramid: HUL is well placed to maximize on the opportunity in a growing market like india with the help of its sustained brand power. The company has increased sharp focus on the needs of its consumers and has build a solid distribution network to support it.

 Premiumisation in urban and rural penetration are two biggest opportunities in india that will propel HUL’s future sales growth. While 60% of the market is still at the bottom-of-the-pyramid, premiumisation is the most prominent trend across categories of foods and personal care.

■ Expansion of Outlets with improved visibility and availablity of its products. HUL increased its direct retail coverage by adding 600000 outlets and improved the visibility of its products through opening up of ‘Perfect Stores’. Increasing Innovation in the product line is the ‘mantra’ for growth in HUL

■ Almost 35% of its turnover in FY11 has come though innovation. HUL focuses on consumer insight and use of breakthrough technology to deliver better and bigger innovations to the consumers. For Eg. Dove shampoo in superior packaging, Brooke Bond Sehatmand delivering vitamins in tea , Project Shakti &; Shaktiman etc.

At the CMP of INR419, the stock is currently trading at a P/E of 39.7x. It discounts its FY12E EPS of Rs.11.64 by 36x and its FY13E EPS of Rs 13.9 by 30x. We value the stock at a target P/E multiple of 36x based on its FY13E EPS to arrive at the Target price of INR500.