Motilal Oswal: HUL Progress On GSK Consumer Healthcare Business On Track, Promise Remains High
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Motilal Oswal Report
Management remains confident on not only double-digit sales growth prospects for the GlaxoSmithKline Consumer Healthcare Ltd. business but also a 550–700 basis point Ebitda margin improvement over the medium term, an impressive combination. The company identified media buying, procurement, technology and data, supply chain, and manufacturing efficiencies as key drivers for medium term margin improvement for the GSKCH business. Despite lockdown and integration from April 1, 2020, GSKCH (as shared in the Q1 FY21 results update) not only grew 5% YoY but also contributed positively to margins (180 basis point margin decline YoY at merged level ex-GSKCH was restricted to 120 basis points decline including GSKCH).
We remain positive on HUL from a medium-term perspective, encouraged by robust earnings growth potential beyond the near term owing to its portfolio and execution strengths and significant synergies in FY22E as a result of GSKCH. These factors suggest premium multiples are likely to sustain.
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