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Motilal Oswal
HUL (Sell)
CMP: ₹630.45
Target: ₹600
We attended Hindustan Unilever’s Analyst Day where management stressed on building a future-ready company in a VUCA (volatile, uncertain, complex and ambiguous) world. Harish Manwani, COO, Unilever, re-emphasised the attractive consumption opportunity in the developing and emerging markets underpinned by gaps in per capita consumption across categories versus other markets. Sanjiv Mehta, CEO & MD, noted the attractive mid- to long-term FMCG opportunity and HUL’s focus on delivering competitive, consistent, profitable and responsible growth. In one of the experiential walkthrough sessions, it explained the distribution initiatives undertaken in the recent past.
While HUL’s performance remained competitive in the backdrop of challenging macro environment, we believe current valuation at 35x FY15E and 31.6x FY16E EPS are rich and adequately capture the positives. Better-than-expected pick up in volume growth is a key upside risk, while spike in input cost, on deficient monsoon, poses margin risk.
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