HUL - Volume Growth Focus Over Margins Leading To Market Share Gains: ICICI Securities
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ICICI Securities Report
Underlying volume growth of Hindustan Unilever Ltd. has been a tad underwhelming in recent times (volumes declined by 1% in nine months FY21).
A change in stance at HUL in favor of volume growth, in our opinion, will be a key driver for HUL stock’s outperformance in 2021.
In India, a ‘growth market’, investors tend to (rightly) ignore short-term profit sacrifice, provided the trajectory of volume outperformance is clear (as it’s DCF-accretive).
Also in our view, the likely cannibalization of 500gm refill pack by 500gm pouch pack in nutrition portfolio imply either a steep gross margin decline and/or re-investment of potential synergy benefits from GlaxoSmithKline Consumer Healthcare Ltd.’s acquisition.
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