Equity Research Report Hul

Value RESEARCH REPORT (HUL) FMCG SECTOR INDIA OUTLOOK The thriving white collar class Indian populace, just as the country segment, present an immense potential for this part. The FMCG division in India is at present, the fourth biggest area with a complete market size in overabundance of USD 13 billion starting at 2012. This area is relied upon to develop to a USD 33 billion industry by 2015 and to a challenging USD 100 billion continuously 2025. This area is described by solid MNC nearness and a settled conveyance arrange. In India the simple accessibility of crude materials just as modest work makes it a perfect goal for this sector.There is additionally extraordinary rivalry between the sorted out and sloppy 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 the Go vernment by Jan 2013 is relied upon to build cost of refreshments, grains, palatable oil, cleanser, flour, salt, circulated air through beverages and mineral water. * Steadily rising fuel costs, prompting expanded dissemination costs. The present stoppage in the economy may bring down interest of FMCG items, especially in the top notch area, prompting diminished 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 on who import crude materials. HIGH GROWTH DRIVING FACTOR * Increasing pace of urbanization, expected to see significant development in coming years. * Rise in expendable 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-farming salary and advantages from government assistance programs. * Investment in securities exchanges of FMCG organizations, which are required to develop continually. This division 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 consistent, independent of downturn or swelling. Consequently this division will develop, however it may not be a smooth development way, because of the current overall financial stoppage, rising expansion and fall of the rupee.This part will see great development over the long haul and employing will keep on staying hearty DEMAND FOR FMCG SECTOR Confidence of purchaser item producers is melting away as a delayedâ monsoonâ and waiting shortcoming in the economy take steps to stifle income development for the area in the following two quarters. A few advertisers, including Dabur, Marico, Godrej Consumer Products Ltd (GCPL), ITC and Emami, dread weight o n 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 handbag strings. While the top of the line, super-premium section doesn't get affected by swelling, request in the mass premium portion could contract if generally monetary supposition doesn't improve,† said Sunil Duggal, CEO ofDabur India, the creator of Real squeezes and Vatika cleanser. ABOUT HUL is the market chief in Indian buyer items with nearness in more than 20 shopper classes, for example, cleansers, tea, cleansers and shampoos among others with more than 700 million Indian customers 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 noteworthy number of brands in this rundown, with six brands including in the b est 15 rundown. The organization has a conveyance channel of 6. 3 million outlets and claims 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. 7 3| 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 | 3,512. 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. Steady GROWTH MODEL (GORDON MODEL) PO = DO(1+g) r-g d1 r-g Where , development rate = authentic 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 extraordinary = 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