HindustanTAT (HINLEV)

CMP: | 1670 Target: | 1900 ( 14%) Target Period: 12 months HOLD

May 6, 2019 Volume growth moderates on high base… Hindustan Unilever (HUL) reported a healthy set of numbers with revenue growth of 9.3% YoY on the back of 7% volume growth. Volume growth

moderated on a high base, after delivering five consecutive quarters of double digit growth. Operating margins expanded 83 bps YoY to 23.3% well Particulars supported by a 63 bps decline in marketing expenses to sales, 35 bps

Particular (| crore) Amount reduction in employee expenses to sales and 11 bps decline in other Market Capitalization 360,720.0 overheads to sales, partly offset by a 27 bps increase in material costs to Total Debt (FY19) 0.0 sales. Led by healthy sales growth and strong margins, net profit for the Cash and Investments (FY19) 6,381.0

Result Update Result quarter grew 13.8% YoY to | 1,538 crore. EV 354,339.0 52 week H/L (|) 1870 / 1443 Leveraging direct reach & building blocks in e-commerce Equity capital 216.0 Face value | 1 Consumer companies have been historically dependent on wholesale FII Holding (%) 11.8 channel as its main trade channel. HUL, which has total reach of 7 million DII Holding (%) 7.0 outlets, has built its direct reach over the period and it stands at around 50%;

much higher than other FMCG players. This gives it an edge over its peers, Key Highlights especially when the wholesale channel is under pressure. Proactively, HUL is also increasing its presence in e-commerce (3% of turnover) which has  Home care (35% of revenue) posted been growing at a fast pace post GST implementation. Additionally, HUL robust growth of 13% with 120 bps expansion in EBIT margins to 17.7%, plans to upgrade consumption in detergent towards premium products specifically from ‘Wheel’ to ‘Rin’ to ‘’ to liquid detergent. Premiumisation driven by premiumisation

trend was witnessed in Q4FY19 with visible signs of strong home care  (45% of revenue) sales growth given larger sales of liquids in detergents & dish wash categories. growth was moderate at 7% impacted Beverage continues to gain market share by muted growth in personal wash (soaps) with a 26 bps improvement in HUL is the leading Indian tea company with brands like Taaza at the EBIT margin to 27.8% economy end, Red Label at the medium end and Taj Mahal, at the premium end. Tea has continued to deliver double digit growth with  Food & refreshments (F&R) segments revenue, profitability growing 1.8x, 2x, respectively, in the past six years. (20% of revenue) grew 10% with 146

HUL’s tea brands are competing with TGBL brands across all segments. bps improvement in EBIT margins to

HUL’s share in tea inched up to 22% from 19% in 2016 while TGBL‘s share 18.1% driven by ice creams and frozen Research Equity Retail

slipped to 21% from 22% in the same period, as per industry reports. In foods segments – volumes, however, TGBL’s share of 20% is ahead of HUL’s 18%. A multi- pronged strategy appears to have worked for HUL in regaining value Research Analyst leadership in tea. Its ‘Winning in Many ’ framework has been Sanjay Manyal effectively leveraged in the tea category. [email protected]

Valuation & Outlook Kapil Jagasia, CFA [email protected] Despite rising input cost pressure, we believe higher growth from improving Securities ICICI volumes and pricing actions along with HUL’s cost efficiencies provide

visibility for future earnings growth. We estimate HUL will report revenue, PAT CAGR of 14%, 16.3%, respectively, in FY19-21E. Though HUL-GSKCH merger would bring in significant synergy benefits, valuations at 50x FY21E provide little headroom for strong upside. Hence, we maintain our HOLD recommendation with a target price of | 1900. Key Financial Summary s Key Financials FY17 FY18 FY19E FY20E FY21E CAGR (FY19-21E) Net Sales 33895.0 33926.0 37660.0 43057.0 49010.8 14.1% EBITDA 6046.8 7276.0 8637.0 9832.4 11140.5 13.6% EBITDA Margin % 17.8 21.4 22.9 22.8 22.7 Net Profit 5036.7 5237.0 6036.0 7102.9 8164.9 16.3% EPS (|) 23.32 24.25 27.94 32.88 37.80 P/E 71.6 68.9 59.8 50.8 44.2 RoNW % 74.9 74.7 80.9 87.3 99.0 RoCE (%) 74.9 79.9 85.3 102.8 116.3

Source: Company, ICICI Direct Research Result Update | Hindustan Unilever ICICI Direct Research

Exhibit 1: Variance Analysis EESes Particulars (| crore) Q4FY19 Q4FY19E Q4FY18 YoY (%) Q3FY19 QoQ (%) Comments Net income grew 9.3% YoY mainly led by 7% volume Total Operating Income 9,945.0 10,001.5 9,097.0 9.3 9,558.0 4.0 growth during the quarter Other Operating Income 136.0 144.0 94.0 44.7 201.0 -32.3

Raw Material Expenses 4,743.0 4,746.9 4,314.0 9.9 4,418.0 7.4 Employee Expenses 402.0 409.3 400.0 0.5 465.0 -13.5 Marketing Expenses 1,107.0 1,245.8 1,070.0 3.5 1,186.0 -6.7 Other operating expenses declined 128 bps YoY as a Other operating expenses 1,372.0 1,497.5 1,265.0 8.5 1,443.0 -4.9 percentage of sales on the back of cost rationalisation measures

EBITDA increased 13.3% on account of a mix EBITDA 2,321.0 2,102.0 2,048.0 13.3 2,046.0 13.4 improvement and cost saving initiatives EBITDA margin (%) 23.3 22.6 22.5 83 bps 21.4 193 bps Depreciation 134.0 131.3 128.0 4.7 133.0 0.8 Interest 7.0 0.0 4.0 N.A. 7.0 N.A. Other Income 118.0 -165.3 100.0 18.0 106.0 11.3

PBT 2,298.0 2,135.9 2,016.0 14.0 1,950.0 17.8 Exceptional charge was pertaining to deferred Exceptional Items -71.0 0.0 -64.0 N.A. -62.0 N.A. consideration payable on account of Indulekha acquisition Tax Outgo 689.0 683.5 601.0 14.6 506.0 36.2 PAT 1,538.0 1,452.4 1,351.0 13.8 1,444.0 6.5 Key Metrics growth YoY (%) Home care 12.9 12.4 14.8 Strong volume growth driven by premiumisation Personal care 7.3 10.4 11.0 Muted growth due to slowdown in key brands Strong growth momentum owing to growth in ice Foods & Refreshments 10.4 13.3 9.9 cream and frozen foods segments EBIT margin (%) Home care 17.7 NA 16.5 120 bps 14.2 350 bps Personal care 27.8 NA 27.5 30 bps 25.7 210 bps Foods & Refreshments 18.1 NA NA NA 15.1 300 bps

Source: Company, ICICI Direct Research

Exhibit 2: Change in estimates FY20E FY21E (| Crore) Old New % Change Old New % Change Comments Sales 43,598.4 43,057.0 -1.2 50,089.3 49,010.8 -2.2 We slightly change our estimates EBITDA 9,753.4 9,832.4 0.8 11,276.2 11,140.5 -1.2 EBITDA Margin (%) 22.4 22.5 15 bps 22.5 22.4 -10 bps PAT 7,097.1 7,102.9 0.1 8,187.0 8,164.9 -0.3 EPS (|) 33.4 32.9 -1.5 38.4 37.8 -1.6

Source: Company, ICICI Direct Research Exhibit 3: Assumptions Current Earlier (| crore) FY17 FY18 FY19E FY20E FY21E FY20E FY21E Comments We have incorporated minor changes in our Home care 11,123.0 11,629.0 12,876.0 14,421.1 16,584.3 14,894.0 17,128.1 estimates Personal care 16,078.0 16,464.0 17,655.0 19,773.6 22,541.9 20,229.5 23,264.0 Refreshments 4,795.0 6,487.0 7,133.0 8,274.3 9,267.2 7,710.3 8,775.9

Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 2 Result Update | Hindustan Unilever ICICI Direct Research

Conference Call Highlights Sales growth on YoY basis (%)  Home care segment grew 13% on the back of strong growth in fabric wash, driven by premiumisation and market development initiatives. Sunlight brand entered the | 500 crore turnover. Surf Excel Easy Wash HUL 9 Liquid was launched on a pan- basis. Growth momentum in household care continued with increased category penetration of bars Foods & Refreshment 10 in rural markets and urban consumer upgrading to dishwash liquids. HUL launched an access pack of Domex in Tamil Nadu to aid market development. HUL continued its strategy to reshape its water purifier Personal care 7 portfolio towards premium devices (UV and RO). Pureit Copper RO purifier has been launched as a part of their water purifier restaging Home care 13 strategy

 Personal care sales growth slowed down to 7% on account of muted 0 5 10 15 sales in the personal wash segment. Premium products under and performed well. Naturals’ portfolio under and Lyril also reported healthy growth. However, mass brands, and , Source: Company, ICICI Direct Research were impacted by moderation in rural demand. HUL intends to take price cuts in these two brands to pass on the benefits of benign input costs and increase the value proposition. Skin care segment witnessed double digit growth led by premium segment. HUL introduced a new brand ‘Simple’ from UK and has currently launched it exclusively through the e-commerce channel. Hair care growth was led by the national relaunch of Dove Nourishing secrets and . Oral care saw acceleration in performance led by Close Up and Ayush Oral Care

 The food & refreshments (F&R) segment witnessed sales growth of 10% as beverages saw consistent secular growth led by WiMI actions while ice cream & frozen foods sustained its strong growth momentum across all formats and food segment continued its steady performance, with strong growth in the Kissan range

 Rural demand has moderated from the earlier 1.3x growth to current 1.1x growth of urban demand

 The company reported an 83 bps expansion in operating margins driven by cost saving initiatives

 The merger process with GSK Consumer and integration of acquisition of Adityaa Milk Ice-cream is on track. Integration and merger costs will be reflected in exceptional items and would not impact EBIT margins in the F&R segment

 Exceptional charge includes | 57 crore additional payout on account of Indulekha acquisition

 Receivables have increased due to higher outstanding from CSD channels

 The management plans to increase focus on e-commerce channels, which form 3% of revenue now

 Led by healthy sales growth and strong operating profit, net profit for the quarter grew 13.8% YoY to | 1,538 crore

ICICI Securities | Retail Research 3 Result Update | Hindustan Unilever ICICI Direct Research

Key Metrics

Exhibit 4: Home care revenue (| crore) and YoY growth (%) Exhibit 5: Personal care revenue (| crore) & growth (%) trend

20000 16.0 25000 22542 20.0 16584 14.0 19774 16000 14421 20000 17655 12876 12.0 16078 16464 11123 11629 12000 10.0 15000 8.0 8000 6.0 10000 4.0 4000 5000 2.0 0 0.0 0 0.0 FY17 FY18 FY19E FY20E FY21E FY17 FY18 FY19E FY20E FY21E

Home Care Sales (LHS) Home Care Sales Growth (RHS) Personal care Sales (LHS) PC Sales Growth (RHS)

Source: ICICI Direct Research, Company Source: ICICI Direct Research, Company

Exhibit 6: Foods & refreshment revenue (| crore) and growth (%) trend 10000 9267 18.0 8274 16.0 8000 7133 14.0 6487 5897 12.0 6000 10.0 8.0 4000 6.0 2000 4.0 2.0 0 0.0 FY17 FY18 FY19E FY20E FY21E Foods & Refreshment Sales (LHS) Foods & Refreshment Growth (RHS)

Source: Company, ICICI Direct Research

Exhibit 7: EBITDA margin and raw material trend Exhibit 8: PAT to grow at CAGR of 16.3% in FY19-21E

25.0 22.6 22.5 22.4 48.0 10000 25.0 21.1 8165 20.0 17.5 8000 7103 20.0 6036 15.0 47.0 47.0 6000 5037 5237 15.0 46.5 10.0 46.3 4000 10.0

5.0 45.5 2000 5.0

0.0 44.0 0 0.0 FY17 FY18 FY19E FY20E FY21E FY17 FY18 FY19E FY20E FY21E

EBITDA margin (%) - LHS RM cost to sales (%) - RHS PAT (| crore) - LHS PAT Growth (YoY)

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 9: Valuation Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%) FY18 33926.0 12.4 24.2 21.4 68.9 49.1 74.7 79.9 FY19E 37660.0 11.0 27.9 15.3 59.8 41.3 80.9 85.3 FY20E 43057.0 14.3 32.9 17.7 50.8 36.3 90.1 105.8 FY21E 49010.8 13.8 37.8 15.0 44.2 32.0 102.1 119.5

Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 4 Result Update | Hindustan Unilever ICICI Direct Research

Exhibit 10: Recommendation History vs. Consensus 2,000 100.0 1,900 1,800 90.0 1,700 80.0 1,600 1,500 70.0 1,400 60.0 1,300 1,200(|) 50.0 1,100 (%) 1,000 40.0 900 30.0 800 700 20.0 600 10.0 500 400 0.0 Apr-16 Jun-16 Sep-16 Nov-16 Feb-17 Apr-17 Jul-17 Sep-17 Nov-17 Feb-18 Apr-18 Jul-18 Sep-18 Dec-18 Feb-19 May-19

Price Idirect target Consensus Target Mean % Consensus with HOLD

Source: Bloomberg, Company, ICICI Direct Research

Exhibit 11: Top 10 Shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Unilever PLC 31-Dec-18 67.19 1,454.4 0.0 2 Life Insurance Corporation of India 31-Dec-18 3.64 78.8 2.8 3 The Vanguard Group, Inc. 31-Mar-19 1.18 25.5 -0.1 4 BlackRock Institutional Trust Company, N.A. 31-Mar-19 0.99 21.4 0.0 5 Nomura Asset Management Co., Ltd. 31-Oct-18 0.59 12.8 0.0 6 SBI Funds Management Pvt. Ltd. 31-Mar-19 0.58 12.5 0.3 7 Aberdeen Standard Investments (Asia) Limited 28-Feb-19 0.33 7.1 -0.7 8 APG Asset Management N.V. 30-Jun-18 0.27 5.9 0.3 9 Aberdeen Asset Managers Ltd. 28-Feb-19 0.26 5.7 0.7 10 Aditya Birla Sun Life AMC Limited 31-Mar-19 0.23 5.1 0.0

Source: Reuters, ICICI Direct Research

Exhibit 12: Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Life Insurance Corporation of India 72.61m 2.78m Schroder Investment Management Ltd. (SIM) -20.81m -0.85m Norges Bank Investment Management (NBIM) 42.92m 1.64m Amundi Hong Kong Limited -19.74m -0.75m Kotak Mahindra Asset Management Company Ltd. 28.89m 1.17m ICICI Prudential Asset Management Co. Ltd. -18.55m -0.75m Robeco Institutional Asset Management B.V. 24.46m 1.00m Goldman Sachs Asset Management International -17.84m -0.73m Aberdeen Asset Managers Ltd. 18.27m 0.75m Aberdeen Standard Investments (Asia) Limited -16.90m -0.69m

Source: Reuters, ICICI Direct Research

Exhibit 13: Shareholding Pattern (in %) Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Promoter 67.2 67.2 67.2 67.2 67.2 FII 12.6 12.2 12.1 12.0 11.8 DII 6.9 7.3 7.3 7.4 7.0 Others 13.4 13.4 13.4 13.4 14.0

Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 5 Result Update | Hindustan Unilever ICICI Direct Research

Financial summary

Exhibit 14: Profit and loss statement | crore Exhibit 15: Cash flow statement | crore (Year-end March) FY18 FY19E FY20E FY21E (Year-end March) FY18 FY19E FY20E FY21E Total operating Income 34,525.0 38,224.0 43,659.8 49,696.9 Profit after Tax 5,153.0 6,036.0 7,102.9 8,164.9 Growth (%) 0.1 10.7 14.2 13.8 Add: Depreciation 478.0 524.0 532.1 474.1 Raw Material Expenses 16,232.0 17,960.0 20,307.5 22,995.5 (Inc)/dec in Current Assets -768.0 80.0 -2,105.0 -1,353.9 Employee Expenses 1,745.0 1,747.0 2,066.7 2,450.5 Inc/(dec) in CL and Provisions 1,587.0 -283.0 848.2 1,272.3 Marketing Expenses 4,105.0 4,552.0 5,080.7 5,734.3 CF from operating activities 5,916.0 6,357.0 6,378.2 8,557.5 Administrative Expenses 1,968.0 0.0 2,411.2 2,793.6 (Inc)/dec in Investments -897.0 0.0 -100.0 -100.0 Other expenses 3,199.0 5,328.0 3,961.2 4,582.5 (Inc)/dec in loans & advances -29.0 3.0 -25.0 -25.0 Total Operating Expenditure 27,249.0 29,587.0 33,827.4 38,556.4 (Inc)/dec in Fixed Assets -837.0 -668.0 764.0 -200.0 EBITDA 7,276.0 8,637.0 9,832.4 11,140.5 Others 499.0 75.0 -170.6 15.8 Growth (%) 20.3 18.7 13.8 13.3 CF from investing activities -1264.0 -590.0 468.4 -309.2 Depreciation 478.0 524.0 532.1 474.1 Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0 Interest 20.0 28.0 0.0 0.0 Inc/(dec) in loan funds 0.0 0.0 0.0 0.0 Other Income 569.0 664.0 703.8 753.1 Dividend paid & dividend tax -4,627.0 -5,536.1 -6,794.3 -8,052.5 Exceptional Income -62.0 -227.0 0.0 0.0 Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0 PBT 7,285.0 8,522.0 10,004.1 11,419.5 Others -24.0 0.0 0.0 0.0 Total Tax 2,048.0 2,486.0 2,901.2 3,254.6 CF from financing activities -4,651.0 -5,536.1 -6,794.3 -8,052.5 PAT 5,237.0 6,036.0 7,102.9 8,164.9 Net Cash flow 1.0 230.9 52.3 195.8 Growth (%) 4.0 15.3 17.7 15.0 Opening Cash 572.0 573.0 803.9 856.2 EPS (|) 24.2 27.9 32.9 37.8 Closing Cash* 3,373.0 3,688.0 3,656.2 3,852.0

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research *includes cash in bank

Exhibit 16: Balance sheet | crore Exhibit 17: Key ratios | crore (Year-end March) FY18 FY19E FY20E FY21E (Year-end March) FY18 FY19E FY20E FY21E Liabilities Per share data (|) Equity Capital 216.0 216.0 216.0 216.0 EPS 24.2 27.9 32.9 37.8 Reserve and Surplus 6,859.0 7,443.0 7,667.5 7,780.0 Cash EPS 26.5 30.4 35.3 40.0 Total Shareholders funds 7,075.0 7,659.0 7,883.5 7,996.0 BV 32.8 35.5 36.5 37.0 Other Non Current Liabilities 666.0 804.0 804.0 804.0 DPS 20.0 22.0 27.0 32.0 Long Term Provisions 772.0 1049.0 106.5 122.5 Cash Per Share 15.6 17.1 16.9 17.8 Total Liabilities 8,513.0 9,512.0 8,794.1 8,922.5 Operating Ratios (%) Assets EBITDA/Total Operating Income 21.1 22.6 22.5 22.4 Gross Block 4,868.0 4,968.0 5,168.0 5,368.0 PBT Margin 21.3 22.9 22.9 23.0 Less: Acc Depreciation 1,092.0 1,616.0 2,148.1 2,622.3 PAT Margin 15.2 15.8 16.3 16.4 Net Block 3,776.0 3,943.0 3,019.9 2,745.7 Inventory days 25 23 25 25 Capital WIP 430.0 373.0 0.0 0.0 Debtor days 12 16 11 11 Total Fixed Assets 4,206.0 4,316.0 3,019.9 2,745.7 Creditor days 75 69 65 65 Net Intangible Assets 366.0 400.0 400.0 400.0 Return Ratios (%) Other Investments 256.0 256.0 356.0 456.0 RoE 74.7 80.9 90.1 102.1 Liquid Investments 0 0 0 0 RoCE 79.9 85.3 105.8 119.5 Inventory 2,359.0 2,422.0 2,949.1 3,356.9 Debtors 1,147.0 1,673.0 1,297.6 1,477.0 Valuation Ratios (x) Loans and Advances 0.0 0.0 235.9 268.6 P/E 68.9 59.8 50.8 44.2 Investments & Other CA 1,405.0 898.0 1,179.6 1,342.8 EV / EBITDA 49.1 41.3 36.3 32.0 Cash 3,373.0 3,688.0 3,656.2 3,852.0 EV / Net Sales 10.5 9.5 8.3 7.3 Total Current Assets 11,139.0 11,374.0 13,447.3 14,996.9 Market Cap / Sales 10.6 9.6 8.4 7.4 Creditors 7,013.0 7,070.0 7,667.7 8,727.9 Price to Book Value 51.0 47.1 45.8 45.1 Provisions & other CL 1,623.0 1,283.0 1,533.5 1,745.6 Solvency Ratios Total Current Liabilities 8,636.0 8,353.0 9,201.2 10,473.5 Debt/EBITDA 0.0 0.0 0.0 0.0 Net Current Assets 2,503.0 3,021.0 4,246.0 4,523.4 Debt / Equity 0.0 0.0 0.0 0.0 Others Non-Current Assets 665.0 746.0 771.0 796.0 Current Ratio 0.9 0.9 1.1 1.1 Application of Funds 8,513.0 9,512.0 8,794.1 8,922.5 Quick Ratio 0.6 0.6 0.7 0.7

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 6 Result Update | Hindustan Unilever ICICI Direct Research

Exhibit 18: ICICI Direct coverage universe (FMCG) CMP M Cap EPS (|) P/E (x) Price/Sales (x) RoCE (%) RoE (%) Sector / Company (|) TP(|) Rating (| Cr) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Colgate (COLPAL) 1,165 1,350 Hold 34,950 28.9 31.9 35.8 40.4 36.5 32.6 7.8 7.1 6.5 62.1 59.2 55.4 43.3 41.7 38.8 India (DABIND) 380 450 Buy 66,747 8.2 9.2 10.2 46.4 41.5 37.4 7.8 7.0 6.3 29.6 28.1 28.4 25.7 24.0 24.3 GSK CH (GLACON) 6,920 8,340 Buy 31,205 166.5 221.2 242.3 41.6 31.3 28.6 7.1 6.5 6.0 29.8 35.6 33.6 20.1 23.6 22.9 Hindustan Unilever (HINLEV) 1,670 1,900 Hold 378,000 28.5 32.9 37.9 58.5 50.8 44.1 9.9 8.7 7.6 100.8 123.7 162.3 87.2 106.9 141.3 ITC Limited (ITC) 303 340 Buy 340,127 10.3 11.3 12.4 29.3 26.8 24.4 7.6 6.9 6.4 35.8 35.7 37.5 24.9 24.7 26.0 Jyothy Lab (JYOLAB) 180 240 Buy 6,617 5.1 5.8 6.6 35.5 31.0 27.4 3.7 3.3 3.0 33.7 37.8 39.3 24.9 28.0 29.1 (MARLIM) 350 400 Hold 47,221 7.4 8.8 9.9 47.5 39.7 35.3 6.3 5.5 4.9 42.2 44.3 43.1 34.5 36.2 34.8 Nestle (NESIND) 10,450 12,000 Buy 99,795 166.7 203.4 243.5 62.7 51.4 42.9 8.9 7.8 6.9 41.4 42.6 44.3 44.5 43.0 42.1 Tata Global Bev (TATGLO) 204 240 Buy 12,938 7.2 7.9 8.7 28.2 25.8 23.4 1.8 1.7 1.6 8.4 9.1 9.5 6.5 7.2 7.6 VST Industries (VSTIND) 3,400 4,000 Buy 4,941 149.9 170.8 185.8 22.7 19.9 18.3 4.4 4.1 3.8 52.5 51.5 50.2 35.1 34.7 33.8 Varun Beverage (VARBEV) 900 860 Hold 14,585 11.7 16.4 20.1 76.8 54.8 44.9 3.6 2.9 2.6 12.7 15.4 17.8 12.1 14.3 17.2

Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 7 Result Update | Hindustan Unilever ICICI Direct Research

RATING RATIONALE ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock

Buy: >15% Hold: -5% to 15%; Reduce: -15% to -5%; Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) – 400 093 [email protected]

ICICI Securities | Retail Research 8 Result Update | Hindustan Unilever ICICI Direct Research

ANALYST CERTIFICATION

I/We, Sanjay Manyal, MBA (Finance) and Kapil Jagasia, CFA, 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. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities Limited is a SEBI registered Research Analyst with SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Research.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co- managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

ICICI Securities | Retail Research 9