I’ve seen a few premium products like St.Iveys at a relative’s house but the label says Unilever. Does HUL gain anything from sale of such premium products on which the label says Unilever. If not, what is the arrangement bewteen Unilever and HUL on this matter.
Thanks
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The value investors have been telling this since 2017 and not for decades. They are right. Since then for 6 years, CAGR has been 6%. HUL need to continue to underperform for atleast 2 years in this price so as to reach 40 PE which is the right entry point to makes 12% CAGR in the next decade or stock need to correct another 20% for a value investor to buy in this year.
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I know people who used to dabble in stocks when most of these value investors were kids…and most of them also never bought HUL then…why? because it was super expensive even then…
Not saying that it will repeat what it has done as we dont know how much growth is possible ahead in business but just wanted to convey that quality is expensive is not new.
It is not being launched by HUL. Some agencies are importing and selling in India o Amazon. Nothing to do with HUL.
Quality stock’s valuation is expensive but they can be expensive only to a certain extent compared to market valuation. There is lot of difference between 80 PE and 30 PE for a 12% EPS CAGR like HUL whereas nifty is always around 22 PE with 10% EPS CAGR.
HUL was not super expensive before 2017.It was trading at 40 P/E on an average most of the time between 2012-2017.
The same HUL was trading at 30PE for a decade between 2002-2011 but no so-called matured growth investor came forward to buy as they were busy speculating on infra and telecom stocks. Hence no demand for HUL stock and never went up to even 40PE for a decade.
The percentage of value investors is much lesser compared to growth+momentum+speculative investors in market and hence value investor’s demand for a stock does not impact price as others are supplying more.
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Thanks for the details & your perspective. Last I had checked, current PE is around 50 for HUL. I maybe wrong.
Again, I have some doubts although cannot say for sure, but HUL was around 50 since a long time.
Regarding NIFTY PE vs HUL PE…I think in addition to EPS CAGR, what matters is the longevity & relative surety with less relative risks & variables for achieving that EPS CAGR.
I am not justifying the high PE nor have any opinion about it…just trying to see that if a relatively risky infra/defence/cement/power etc. can trade at “x” valuation, what can an FMCG trade at.
Of course with digital era there have been disruptions in terms of D2C, retail private labels & ecommerce…this is according me a defining decade in progress for what will be about to come…whether the delta to X would sustain or not…how rural, rurban & urban would behave and which FMCG firms are able to work their way around it & how soon & how efficiently…
All earnings are not same. Needs to be seen in context of cash flow,return ratios and longevity.
At end of the day any business needs to valued only on basis of all cash flows till eternity.
Most of the valuation of a company is dependent on terminal value. Something like L&T EPC would start seeing a lot of degrowth a decade down the line vs HUL. India’s population is likely to remain around current population till end of century thus providing long runway for FMCG companies.
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If one believe EPS growth of HUL has better longevity than that of Nifty, one can always have different perception.
In spite of 1% CAGR population growth of India in past 10 years, HUL EPS growth is 11%. Then how can one expect it to be better in the next 1 or 2 decades ?
FMCG cannot have a growth beyond a point as one dont brush or take bath thrice a day due to personal income growth but pay more for technology or luxury which is part of Nifty.
I mean it stayed at 75-80 PE for 2 years between 2019-21 and still LIC was buying it. Thats the thought process of all fund houses- Buy quality at any price.
I haven’t been through the concalls in quite sometime.
Can anyone share volume/value/overall growth guidance from management? Any capex they are undertaking? Premiumization plans?
Disclosure: Invested since 2020. Considered it a safe bet with low expectations 8-10% to stabilize portfolio against severe downturns. Terrible growth numbers this year are giving me the jitters, looks like this ‘safe bet’ also needs an active watch. Hope it returns to same old 8-10% soon 
Mentioning Notes from Screener:
Operating Context and Financial Performance:
- Softening in prices of key commodities passed on to consumers.
- Nominal to no price growth due to high cumulative inflation and weak monsoon affecting rural demand.
- Urban, organized trade, and premium portfolio led growth for FMCG overall.
- Resilient performance with underlying sales growth of 3% and underlying volume growth of 2%.
- EBITDA margin up 40 bps year-on-year.
- Net profit crossed 10,000 crores in fiscal year.
- Market shares improved by almost 200 bps compared to 2021.
- Small and regional players resurgence affecting market shares marginally.
- Expectation of MAT business winning metric to come back towards the second half of calendar year 2024.
- Underlying volume growth of 2% in Q4.
- EBITDA margin at 23.4%.
- Profit after tax before exceptional items and profit after tax declined by 3% and 6%, respectively.
- Home Care grew 1%, Beauty and Personal Care declined by 2%, Foods and Refreshment had positive pricing and delivered mid-single-digit USG.
- Margins remained healthy in all three segments.
Key Thrust Areas and Business Strategy:
- Focus on growing the core through unmissable brand superiority.
- 19 brands with turnover over INR 1,000 crores each.
- Embarked on a journey of making brands unmissably superior.
- Market making and premiumization focus through persuasive communications, innovating in new demand spaces, and educating consumers.
- Strong portfolio leading growth, contributing to more than 25% of business.
- Transformation in Beauty segment focusing on contemporizing master brands, investing in high-growth demand spaces, and embedding core capabilities.
- Leveraging capabilities to outperform in the Beauty segment.
- Continuous focus on premiumization, innovation, and market penetration.
- Expecting improvements in rural consumption with better monsoon and macro-economic indicators.
- Optimistic outlook for the future with a focus on driving competitive growth and maintaining margins.
Segment Performance:
- Laundry Segment: Powders continue to grow in volume, liquids growing ahead due to faster conversion, bars returning back to growth, focus on premiumization.
- Health Food Drinks (HFD): High single-digit growth driven by pricing and volume growth, Nutrition Plus range accelerating growth, efforts to build consumption yielding results.
- Beauty Segment: Mid-single digit growth, premium portfolio growing in double digits, pioneers in liquids category, focus on premiumization and innovation.
- Soaps Business: Sharp decline in performance, actions taken to address low unit price value equation, premium brands performing well.
- Personal Care Segment: Decline in mass end of the portfolio, premium portfolio showing stronger growth, continued focus on building penetration and consumption in key categories.
- Horlicks and Health Food Drinks: Significant efforts in building penetration and consumption for Horlicks, focus on building premium portfolio and driving growth in the adult space.
Market Share and Channel Strategy:
- Gaining market share in the Beauty and Personal Care segment.
- Recovering market share in categories like mass skin cleansing and detergent bars.
- Focusing on building penetration and consumption in key categories.
- Channel split: under 70% in general trade, under 20% in modern trade, around 6-7% in e-commerce.
- E-commerce growing fastest, followed by modern trade and general trade.
- Quick commerce segment gaining traction within e-commerce.
- Focusing on high margin portfolio in quick commerce, beauty commerce, and marketplace.
Outlook and Future Plans:
- Expecting gradual improvement in FMCG demand.
- Forecast of above-normal monsoons and improving macro-economic indicators.
- Price growth expected to be low single-digit decline in near term.
- Focus on driving competitive volume-led growth across business.
- Actions underway to address performance in the skin cleansing segment.
- No immediate plans for price increase due to deflation in commodity basket.
- Planning for low single digit price increase in the second half of the financial year.
- Targeting 23-24% EBITDA margin band, with focus on maintaining current levels in the short term and modest margin improvement in the medium to long term.
- Unilever planning to separate the ice cream business by second half of 2025, further decisions and strategies to be communicated in the future.
5 Year and 10 Year Median P/E is 64 ad 61. Long Term Median P/E is 47.
Valuations are at 10 Year Low P/E of about 53 at the moment.
5 Year Sales and PAT Growth is 10% and 11%, and Stock Price CAGR is 6%. Slow growth will continue for some time. Price CAGR will depend of P/E re-rating.