Equity Research Report Hul

Value RESEARCH REPORT (HUL) FMCG SECTOR INDIA OUTLOOK The expanding working class Indian populace, just as the rustic segment, present a tremendous potential for this division. The FMCG area in India is at present, the fourth biggest division with a complete market size in abundance of USD 13 billion starting at 2012. This division is required to develop to a USD 33 billion industry by 2015 and to a challenging USD 100 billion continuously 2025. This segment is portrayed by solid MNC nearness and an entrenched dissemination organize. In India the simple accessibility of crude materials just as modest work makes it a perfect goal for this sector.There is additionally extreme rivalry between the composed and disorderly portions and the battle to keep operational costs low. Difficulties TO FMCG SECTOR * Increasing pace of expansion, which is probably going to prompt greater expense of crude materials. * The normalization of bundling standards that is probably going to be actualized by t he Government by Jan 2013 is relied upon to expand cost of refreshments, oats, palatable oil, cleanser, flour, salt, circulated air through beverages and mineral water. * Steadily rising fuel costs, prompting expanded conveyance costs. The present log jam in the economy may bring down interest of FMCG items, especially in the superior area, prompting decreased volumes. * The declining estimation of rupee against different monetary standards may diminish edges of numerous organizations, as Marico, Godrej Consumer Products, Colgate, Dabur, and so forth who import crude materials. HIGH GROWTH DRIVING FACTOR * Increasing pace of urbanization, expected to see significant development in coming years. * Rise in dispensable salaries, bringing about premium brands having quicker development and more profound infiltration. * Innovative and more grounded channels of dissemination to the country section, prompting further infiltration into this portion. Increment in rustic non-rural salary and advantages from government assistance programs. * Investment in financial exchanges of FMCG organizations, which are required to develop continually. This segment will keep on considering development to be it relies upon an ever-expanding inward market for utilization, and interest for these merchandise stays pretty much steady, regardless of downturn or swelling. Henceforth this division will develop, however it may not be a smooth development way, because of the current overall financial log jam, rising swelling and fall of the rupee.This area will see great development over the long haul and recruiting will keep on staying strong DEMAND FOR FMCG SECTOR Confidence of customer item producers is winding down as a delayedâ monsoonâ and waiting shortcoming in the economy take steps to quell income development for the segment in the following two quarters. A few advertisers, including Dabur, Marico, Godrej Consumer Products Ltd (GCPL), ITC and Emami, dread weight on premium items and country request †two significant development drivers †in the coming a very long time as supported highâ inflationâ and a hold-up in storm could provoke purchasers to fix satchel strings. While the top of the line, super-premium fragment doesn't get affected by expansion, request in the mass premium section could contract if in general monetary assumption doesn't improve,† said Sunil Duggal, CEO ofDabur India, the producer of Real squeezes and Vatika cleanser. ABOUT HUL is the market head in Indian buyer items with nearness in more than 20 customer classes, for example, cleansers, tea, cleansers and shampoos among others with more than 700 million Indian shoppers utilizing its items. Seventeen of HUL’s brands highlighted in the ACNielsen Brand Equity rundown of 100 Most Trusted Brands Annual Survey (2011).The organization additionally happens to have the most elevated number of brands in this rundown, with six brands including in the best 15 ru ndown. The organization has a dispersion channel of 6. 3 million outlets and possesses 35 significant Indian brands. Its brands incorporate LABOR COST IN INDIA IS THE LOWEST AMONG THE EMERGING ASIAN COUNTRIES HUL RATIOS RATIO| 2012| 2011| 2010| 2009| 2008| Current Ratio| 0. 8954| 0. 9000| 0. 81268| 0. 9834| 0. 65823| Quick Ratio| 0. 4978| 0. 4711| 0. 48604| 0. 5436| 0. 27253| Cash Flow Liquidity ratio| 0. 6038| 0. 5519| 0. 80573| 0. 6679| 0. 38392| Average Collection Period| 13. 343| 17. 560| 14. 0918| 10. 01| 12. 2710| Days Inventory Held| 48. 957| 59. 526| 53. 1215| 51. 365| 60. 4530| Days Payable Outstanding| 73. 481| 81. 979| 104. 886| 66. 724| 87. 8556| Account Receivable turnover| 27. 355| 20. 785| 25. 9014| 36. 494| 29. 7448| Accounts Payable Turnover| 3. 6017| 3. 0947| 2. 43856| 3. 9712| 3. 01573| Inventory Turnover| 5. 4059| 4. 2619| 4. 81485| 5. 1589| 4. 38272| Fixed resources turnover| 10. 36| 9. 01| 8. 01| 12. 34| 8. 87| Total Assets Turnover| 4. 9807| 5. 4970| 6. 59332| 7. 9313| 8. 55871| Debt Ratio| 0| 0. 00402| 0. 1683| 0. 06321| LONG TERM DEBT TO CAPITAL EMPLOYED| 0| 0. 00402| 0. 683| 0. 06321| gross benefit ratio| 16. 449| 40. 107| 41. 4842| 49. 423| 51. 688| Operating Profit Ratio| 16. 456| 15. 911| 16. 8758| 15. 909| 18. 0540| Net Profit Ratio| 11. 947| 11. 520| 12. 2033| 12. 268| 13. 8754| Return on Investments| 59. 509| 63. 326| 80. 4618| 97. 307| 118. 755| Return on Equity| 76. 068| 84. 339| 81. 1040| 117. 42| 127. 232| Cash Return on Assets| 0. 4351| 0. 5281| 1. 29341| 0. 7963| 1. 07195| Price to Earning| 18. 569| 26. 227| 30. 0113| 37. 728| 56. 8245| Peer correlation s. no. | Name | Market capitalisation| Sales turnover| Net benefit | Total assets| 1| GODREJ| 22933. 3| 2980. 08| 604. 39| 2761. 43| 2| DABUR| 22448. 83| 3759. 33| 463. 24| 1576. 54| 3| MARICO| 13361. 56| 2970. 30| 336. 58| 1677. 27| 4| EMAMI| 9101. 40| 1389. 82| 256. 81| 804. 23| 5| P&G| 8103. 50| 1297. 41| 181. 29| 600. 62| 6| GILLETTE| 7130. 13| 1232. 90| 75. 73| 600 . 33| 7| JYOTHY LABS| 2860. 82| 662. 97| 83. 52| 1226. 42| 8| BAJAJ CORP. | 2926. 40| 473. 31| 120. 09| 427. 86| 9| HUL| 118139| 22116. 37| 2691. 40| 3512. 93| BALANCE SHEET OF HUL| â€â€â€â€â€â€- in Rs. Cr. â€â€â€â€â€â€- | Mar '12| Mar '11| Mar '10| Mar '09| Dec '07| | 12 mths| 12 mths| 12 mths| 15 mths| 12 mths| | |Sources Of Funds| | Total Share Capital| 216. 15| 215. 95| 218. 17| 217. 99| | Equity Share Capital| 216. 15| 215. 95| 218. 17| 217. 99| 217. 75| | Share Application Money| 0. 00| 0. 00| 0. 00| 0. 00| 0. 00| | Preference Share Capital| 0. 00| 0. 00| 0. 00| 0. 00| | Reserves| 3,296. 11| 2,417. 30| 2,364. 68| 1,842. 85| 217. 75| | Revaluation Reserves| 0. 67| 0. 67| 0. 67| 0. 67| 0. 67| | Networth| 3,512. 93| 2,633. 92| 2,583. 52| 2,061. 51| 1,439. 24| | Secured Loans| 0. 00| 0. 00| 0. 00| 144. 65| 25. 2| | Unsecured Loans| 0. 00| 0. 00| 0. 00| 277. 30| 63. 01| | Total Debt| 0. 00| 0. 00| 0. 00| 421. 95| 88. 53| | Total Liabilities| 3,51 2. 93| 2,633. 92| 2,583. 52| 2,483. 46| 1,527. 77| | Mar '12| Mar '11| Mar '10| Mar '09| Dec '07| | 12 mths| 12 mths| 12 mths| 15 mths| 12 mths| | Application Of Funds| | Gross Block| 3,574. 67| 3,759. 62| 3,581. 96| 2,881. 73| 2,669. 08| | Less: Accum. Depreciation| 1,416. 88| 1,590. 46| 1,419. 85| 1,274. 95| 1,146. 57| | Net Block| 2,157. 79| 2,169. 16| 2,162. 11| 1,606. 8| 1,522. 51| | Capital Work in Progress| 210. 89| 299. 08| 273. 96| 472. 07| 185. 64| | Investments| 2,438. 21| 1,260. 68| 1,264. 08| 332. 62| 1,440. 81| | Inventories| 2,516. 65| 2,811. 26| 2,179. 93| 2,528. 86| 1,953. 60| | Sundry Debtors| 678. 99| 943. 20| 678. 44| 536. 89| 443. 37| | Cash and Bank Balance| 510. 05| 281. 91| 231. 37| 190. 59| 200. 11| | Total Current Assets| 3,705. 69| 4,036. 37| 3,089. 74| 3,256. 34| 2,597. 08| | Loans and Advances| 1,314. 72| 1,099. 72| 1,068. 31| 1,196. 95| 1,083. 28| | Fixed Deposits| 1,319. 9| 1,358. 10| 1,660. 84| 1,586. 76| 0. 75| | Total CA, Loans and Advances| 6,340. 40| 6,494. 19| 5,818. 89| 6,040. 05| 3,681. 11| | Deffered Credit| 0. 00| 0. 00| 0. 00| 0. 00| 0. 00| | Current Liabilities| 5,688. 44| 6,264. 21| 5,493. 97| 4,440. 08| 4,028. 41| | Provisions| 1,945. 92| 1,324. 98| 1,441. 55| 1,527. 98| 1,273. 90| | Total CL and Provisions| 7,634. 36| 7,589. 19| 6,935. 52| 5,968. 06| 5,302. 31| | Net Current Assets| - 1,293. 96| - 1,095. 00| - 1,116. 63| 71. 99| - 1,621. 20| | Miscellaneous Expenses| 0. 00| 0. 00| 0. 00| 0. 0| 0. 00| | Total Assets| 3,512. 93| 2,633. 92| 2,583. 52| 2,483. 46| 1,527. 76| | CAPITAL ASSET PRICING METHOD 1. REQUIRED RATE OF RETURN = Risk free return +? (Hazard premium) Ri = Rf + ? (Rm †Rf) = 8. 1 +0. 27 (6. 5) Ri = 9. 855% 2. ZERO GROWTH MODEL Where, profit = Rs. 7. 5 Po = d/r = 7. 5/9. 855% Po = 76. 10 3. Consistent GROWTH MODEL (GORDON MODEL) PO = DO(1+g) r-g d1 r-g Where , development rate = chronicled development of normal profit paid of most recent 5 years g = 6. 75% = 7. 5(1+6. 75%) (9. 855-6. 75)% PO = 258. 266 4. Verifiable development P0 = d1 R †g Where, po = 534. 25, d1=8. 006 , r= 9. 855% P0 = d1 R †g 534. 25= 8. 006/(0. 098-g) G= 0. 083 or 8. 3% Cash stream model Ri = 9. 855% Calculation of development pace of incomes =(1. 69*1. 51*. 54)1/3 - 1 = . 1128 =11. 28% Assuming the irregular development of (11. 8%) is for a long time, and after this the organization has returned to ordinary development direction of 6% development rate Cash stream from activity = 2884. 24 crore Vc = 2884. 24(1+. 1128)/(1+. 09) + 2884. 24(1+. 1128)2/(1+. 09)2 + 2884. 24(1+. 1128)2(1+. 06) (9. 855-6)% (1. 09)2 Vc = 88605 Vp = 0 Vd = 1000 Therefore, Ve = Vc †Vp †Vd = 88605-1000 = 85605 crore Total no. of offers exceptional = 216. 15 crore Po = Ve Total no. of offers exceptional = 85605/216. 15 Po = 396. 04 MULTIPLE MODEL p/e of company=32. 95 p/e of industry = 44. 0 cost of company’s share = 534. 25 income at the company’s stock = cost of co. stock p/e of the co. =5