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Edelweiss Research
Hindustan Unilever (Buy)
Target: ₹2,960
CMP: ₹2,307.6
Hindustan Unilever (HUL), which now houses one of the biggest food businesses in India, has completed SAP migration and 85 per cent of go-to-market integration for its nutrition business.
With this strong grounding, the company is taking the next important steps such as getting aggressive in terms of launches – Horlicks Diabetes Plus already initiated and investing in market development – started ₹2 and ₹5 sachets to drive trials. Margin realisation is ahead of the plan and we see another 300–400 bps opportunity to reduce costs, which could be redeployed towards market development.
Overall, we remain positive on HUL’s ability to outgrow the market, as well as its pricing power, underpinned by distribution expansion, deepening direct reach and product innovation initiatives. The ongoing demand shift from smaller players to HUL would continue, particularly in tea and soaps.
The merger of GSK’s portfolio with HUL has begun to yield revenue delta. We believe the larger story will be innovation and new products in HFD and allied categories. And we also expect HUL margins to improve sequentially on the back of price hikes and a cool-down in certain raw material prices.
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