Hindustan Lever Ltd. (HLL) F12/06 - Result Update
HLL recorded 9.4% yoy growth in net sales at Rs121bn in F12/06 driven by 13.7% yoy growth in HPC (double-digit growth in laundry and toothpaste) and 9% yoy growth in Foods segment. During Q4 F12/06, the company has taken a price hike in some of its most popular brands like Lux (by 7.7%), Lifebuoy (100gms pack - by 11%) and Surf Excel Blue (1.5kgs pack - by 3.5%).
Operating profit increased by 14.2% yoy to Rs16.5bn. Operating margins expanded marginally by 60bps to 13.6% mainly due to sharp 26.6% yoy rise in adspend at Rs12.7bn (10.5% of sales). The company is likely to maintain the high levels of adspend (between 10-15%) going forward.
Pre-tax profit grew by 16% yoy to Rs18.6bn partly aided by higher other income and lower interest cost. Effective tax rate was at 17.3% resulting in a tax outgo of Rs3.2bn. Net profit grew by 13.7% yoy to Rs15.4bn.
Adjusted net profit after extraordinary income (Rs3.2bn) rose by 31.8% yoy to Rs18.6bn translating in an EPS of Rs8.4 per share. The company has declared a final dividend (including interim dividend of Rs3) of Rs6 per share.
Going forward, HLL’s growth would primarily be driven by growth momentum in the topline. At the current market price of Rs19, the stock is trading at 23.3x F12/07E EPS of Rs8.4 per share. We maintain ‘Market Performer’ rating on the stock.