Approximately for what time horizon are you buying HUL for?
@Investor_No_1…for as long as it can compound its earnings at 13-17 percent kind of rates and maintains the hefty dividend payouts that HUL is known for.
If this happens for next 5,10 15 yrs…I dont see a reason to sell.
The real risk is…what if it doesn’t happen. Or if the earnings growth is lower than this.
That may lead to a de-rating in the stock, a PE compression etc. However , my informed guess ( or judgement ) is …its unlikely for the foreseeable future ( atleast next 2,3 4 yrs ).
But I cant be too sure…obviously.
Investing is a game of taking on informed bets. Just to be on safer side, I take them in typically high ROE , asset light, min govt interference businesses.
Regards,
Ranvir Dehal
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Technically, I believe it should come 1825-1865 range for safe bet buying. Of course, missing is more painful than give few extra bucks.
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Even if the stock remains range bound, like it was from 1997-2010, while small and mid cap returns back to their rally ?
I would like to know and perhaps learn from your conviction behind HUL, the stock definitely has corrected but it still appears massively overvalued to me.
Valuations are questionable…yes. But the thing with HUL is that they always remain stretched.
This is not a genuine excuse. I admit.
However, if one is ready to accept no returns ( a theoretical scenario ) …say till Mar 21, EPS should be in the range of Rs 40 per share( this includes the GSK kick ).
Now at Rs 40 EPS and Mkt price of Rs 2000, its an earning yeild of 2%. ( this EPS will decide the mkt price of stock ) .Plus u can safely assume an annual dividend payout of say Rs 30 per share for FY ending 21(thats about 1.5% additional return ) …from hereon, both the EPS and DPS should march northwards.
HUL dominates the most promising and profitable Indian Industry- FMCG…that too by a wide margin. There is no one who is even close. Be it soaps, detergents, dishwashing, shampoos, soups, Ketchups, Tea, Coffee, Makeup, Body lotions , face creams etc etc etc.
HUL IN INDIA IS IN AN UNPRECEDENTED SITUATION.
ITS DOMINANCE OF INDIAN FMCG INDUSTRY HAS NO PARALLELS IN THE ENTIRE WORLD.
THAT’S SOME FEAT. THAT’S WHY THE TOP DOLLARS.
Finally, the beauty is in the eye of the beholder.
Regards,
Ranvir Dehal
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HUL is now a completely different beast (HUL 2.0) with its WiMi (localization) & premiumization strategy.
Their agility is on clear display (scuttlebutt, ads, reports) and has just started to show results. Just go through their latest AR & Presentations and compare them with the other FMCG players’ strategy.
In addition, you may read the latest book “The CEO Factory: Management Lessons From Hindustan Unilever” to understand HUL DNA.
Disc. Invested and biased.
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I agree with you and myself got this realisation a little late than i would have expected myself. Just wanted to know that u had been buying FMCG since many years but entered HUL recently. Is it that like me you got this realisation late or any other specifics? Also with regards to my realisation, i sometimes think is it because i saw it perform in bad times and hence became a market movement follower…
Lastly curious why this beast saw almost 15 years of stock consolidation…was it because of valuation or its earnings/revenues didn’t grow for that long …anyone has insights would be good to know. Thanks
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Hi,
Hope you don’t mind me hijacking this thread with my experiences.
I’m in direct equity since late 2016, but cashed out in mid 2017 with some gains, as I wanted to make more informed choices while investing. I reentered during May this year and has been increasing allocation steadily to various picks. Throughout this journey I got rid of many mental blocks: e.g. earlier I used to invest only in smaller mcap companies, lower PE companies etc.
I got invested in Nestle earlier despite it having 1000 bil INR mcap, as the categories it is present has less penetration and Nestle has visibly upped its aggression. However, I didn’t touch HUL 1) because of its 4000 bil INR mcap, and 2) the categories it is present are supposed to be saturated with multiple players contesting to get a foothold. TBH, since I choose to ignore it based on a gross assumption, I didn’t even study it any further.
I was rather invested in Jyothy Labs, which have similar segments as HUL. They have got good quality products which we use daily, but I am still annoyed by the lack of availability of some products in our region: Margo Glycerine, Ujala IDD etc. Also, they have been talking about brand extensions which they are doing pretty slowly or taking those to market very slowly and I also hardly see any promotions of their products. Only recently I realized that the benchmark I was using to judge Jyothy Labs’ promptness was HUL’s. I was impressed by the aura of the promotions that HUL was doing for its products and the ready availability of their products in all channels.
The last bump came from my sister-in-law who is a fashionista. While vising her place I came across various brands: TRESemmé, Aviance and also saw some unique product of Dove (Dove Elixir Hair Oil). I was shocked to see that these brands are from the house of the age-old HUL. Being curious I started digging and discovered that the household brands from HUL, Vaseline, Lifebuoy, Close-up all has gotten a number of new variants, also the fabric care brands like Sunlight, Surf Excel has gotten in categories like liquid detergents.
So, after scuttlebutt, and scouting for various media reports and official documents, I came to see that HUL is creating a distinction in each segment it is present: be it promotion, packaging, new categories or anything. Despite all the potential of Dabur being the torchbearer of Naturals boom after waning of Patanjali threat, Lever Ayush has scaled up much faster and has gotten much wider acceptability.
My rough assumption is that, given the number of brands HUL have (compare that with other FMCG players) and the number of new categories they are creating by acquiring new brands (like Indulekha, Adityaa Milk) or brand extension, HUL still has a huge runaway ahead. Also, their WiMi / Localization push will ensure that they will reach even hinterlands. And, premiumization push will ensure better margins.
HUL used to be present in all segments during 2000, and faced steep competition from local agile companies like Marico, Dabur etc. These has paused their volume growth. That along with the entry of Patanjali, gave HUL a reality check and they started to restructure their business, strengthen brands during those periods. They had gotten rid of lower margin products such as Hair Oils (Nihar), Breads (Modern) etc. Probably they realized that competing in the low end is not their forte. They are masters of advertising and they’d better use that strategy to push premiumization as the country has gotten rising level of affluent class of people. They later entered hair oils but with premium range (Dove Elixir, Indulekha).
So, now my thesis of HUL is similar to Nestle. They both have products which are premium or have lesser penetration. Product range of HUL is much more than Nestle and also their Advertising push is better than Nestle, only the distribution push is similar, but that is understandable because HUL is almost 3.5th the size of Nestle.
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@sujay85…thanks for bringing out so many details. It really helps.
@Investor_No_1…yes. I think u r right. It was a case of late realization or maybe the search for an intellectual high that one gets by identifying and making money in Mid Caps. This, probably led me to ignore the elephant in the room…HUL.
Wrt to your question about HUL under performing for 10 odd years before 2012-13… if u see their financials, they have only got their act together post 2012-13 as far as profitability is concerned. The same is getting reflected in the stock price. Mkt has been rewarding them for the same. Various other details were brought out by @sujay85.
Regards,
Ranvir Dehal
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True. I had the same serendipitous realization. It was like staring at me all the time and I kept ignoring it.
Btw, I have added one link in my previous post that describes the strategy that caused HUL’s turnaround in fortunes after years of stagnation in turnover.
To add to my previous post. HUL is not only a FMCG company now. It is also into appliances: Water Purifier & Air Purifier under PureIt brand. It has entered into Water Purifier since 2006 and is a formidable player now.
It is a newer entrant to Air Purifier after Unilever Plc.’s acquisition of Swedish air purifier maker Blueair.
So, it seems that it is open to enter into more appliances category through acquisitions. I am particularly hoping that they acquire Eureka Forbes, since they have gotten the proposal.
Also, Globally, they have a very strong Food business which in India is yet to show forte. I hope someday it will. They’ve entered into a futuristic food category last year.
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Hi everyone…
Nice to see some movement in FMCG stocks today.
I have some expectations from q3 ,q4 and q1 ( FY-20-21 ) results. Let me share them. Then, time would tell weather I was right or wrong. ( OTHERWISE…A VERY RISKY THING TO DO IN LIFE )
I expect the following-
GCPL to start doing well internationally from q3 and domestically from q4 onwards.
Marico’s volume growth to pick up to Mid single digits by end of q4.
IndusInd bank…to start to look pristine again by end of q4.
Britannia and Nestle to start really doing well on most operational fronts- q3 onwards.
Hoping for the best.
Disc: invested in all of them.
Regards,
Ranvir Dehal
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Are you invested in Jyothy now? Then what is your expectation from them? 
Disc. Converted my Jyothy Labs holdings to HUL recently. It’s on watchlist now.
Yes…I am also holding Jyothy Labs. I had also converted my JLL into HUL.
He He.
Present holding in JLL is a tracking kind of position.
I would increase my stake if the following is sustained -
Continued growth in Exo and Pril ( in both ).
Moderate ( industry equivalent ) growth in Henko, Mr white.
Industry beating growth in Ujala Detergent.
Uptick in HI business post the crackdown on illegal agarbattis.
Moderate ( industry equivalent ) growth in Margo.
If these vital parameters stay normal for JLL, incremental buying can be resorted to.
But…these are my opinions. I reserve the right to be wrong.
Regards,
Ranvir Dehal
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Just posting my Updated portfolio-
HDFC bank- 10.2%…@708
Indusind bank-5.9%…@ 1640
HUL-26%…@1925
Dabur-10.5%…@400
Marico-10.5%…@207
GCPL- 10.5%…@490
Britannia-4.2%…@1365
Nestle-6.7%…@9700
TTK Prestige-5.7%…@5370
VIP Industries-4.5%…@465
TVS Srichakra-2.5%…@2870
Tracking postn-
Less than 1 pc of portfolio- Jyothy Labs @ 174
Exits/entries in last 1 month -
Exits- Maruti Suzuki.
Entries- Increased allocation in Marico, Dabur, GCPL, HUL
Last 3 yr’s exits -
Profitable Exits-
Bajaj Finance ( I regret it )
Goodyear India
PVR
Aarti Industries ( regrets again )
HDFC Ltd
Huhtamaki PPL
Jyothy Labratories
Yes Bank ( thank god…had sold @ 330, bought @ 80 or so )
Emami Ltd
Loss making exits-
Hero Motocorp
Lupin
Karur Vysya Bank
Finolex Cables
Flattish/ minor gains/ loss making exits-
Maruti Suzuki
Bajaj Auto
Eicher Motors
Stake increases in last 3 Yrs -
Marico
Dabur
GCPL
HUL
Repeatedly…in all four. Averaging up…basically ( on most dips ).
Britannia and Nestle never gave a chance. Otherwise, the intention is to avg up on a descent correction.
Mar 2014-Feb 2020…Avg returns- 17% compounded annually
Regards,
Ranvir Dehal
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Hi,
Very nice.
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How do you see TTK Prestige 10 years from now, & how long are you holding? We unfortunately don’t have any thread on this company.
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How do you see VIP industries compared to Safari qualitatively. I personally find Safari more agile, but VIP has multiple great brands (Safari has 1).
Hi…
TTK Prestige- I see TTK as a complete light home and kitchen appliance maker ( a popular one ) in say next 3 yrs. Light home and kitchen appliance would include-
Cookware ( metallic ), Juicers, Mixers, Grinders, Induction Cooktops, Conventional Gas- cooktops, Toasters, Cleaning solutions ( new products ) etc
Major Organized Competitors- Hawkins, Philips, Havells, Bajaj Electricals, V Guard etc. Every competitor has his own set of products where he is strong. There is no perfect overlap. Ex- Philips is dominant in home appliances but non existent in Cookware and Gas Cooktops etc.
Market Penetration of most products- Low to Abysmal ( product to product )
Can TTK keep growing handsomely for the near future- Yes …in my opinion.
Courtesy- good brand, market that is full of opportunities, good execution track record.
Frankly…I don’t have a 10 yr vision for TTK. But i m reasonably confident about the 5 yr vision. Lets see.
Some thoughts on VIP vs Safari-
VIP is brand rich. Eg- Vip, Aristocrat, Skybags, Carlton, Caprese.
Both stocks - aren’t cheap.
I m just being safe.
Regards,
Ranvir Dehal
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Disc : bought HDFC bank…due 8-9 percent correction from 52 week highs.
Today’s Manufacturing PMI data, Dec core sector data- look very very encouraging!!!
Looks like that the economy is finally turning a corner.
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Disc: I have started buying V Guard Industries.
It was on my radar for quite some time. Also , held it from 110 levels and sold at around 200 levels sometime in 2018.
Now, with incremental growth catching up and price correction of over 2 yrs, I thought an entry in the company may not be a bad idea at all.
Hence the plunge.
Intend to buy more.
Regards,
Ranvir Dehal
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Have you looked at large appliance players? e.g. Whirlpool, Voltas, Bluestar, Hitachi or IFB Ind.? Havells has also gotten an entry to the large appliance domain with Lloyd, although that segment is yet to move out of headwinds for them.
In my view, large appliances face hardly any competition from less known players. The competition comes from mostly large global players LG, Samsung, Bosch, Honeywell etc. Large appliance market is also less penetrated.
In contrast, small appliances (Fan, Mixture Grinder, Juicer, LED, heater, Cooler, Iron, Hair Dryer) face steep competition and the only barrier is brand & distribution reach.
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@ranvir Really very good learning from your PF creation and thought process to all of us here. Really a great thread on VP to follow.
I believe u follow certain companies and wait for correction- price wise or time wise or buy on bad news or tax raid or buy on really good quarter results or just buy when ever u have money.
Just trying to understand how u accumulate or build a position in a company over a period. Please through some info.
Also share the latest PF.
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