Mentioning Notes from Screener:
Operating Context and Financial Performance:
- Softening in prices of key commodities passed on to consumers.
- Nominal to no price growth due to high cumulative inflation and weak monsoon affecting rural demand.
- Urban, organized trade, and premium portfolio led growth for FMCG overall.
- Resilient performance with underlying sales growth of 3% and underlying volume growth of 2%.
- EBITDA margin up 40 bps year-on-year.
- Net profit crossed 10,000 crores in fiscal year.
- Market shares improved by almost 200 bps compared to 2021.
- Small and regional players resurgence affecting market shares marginally.
- Expectation of MAT business winning metric to come back towards the second half of calendar year 2024.
- Underlying volume growth of 2% in Q4.
- EBITDA margin at 23.4%.
- Profit after tax before exceptional items and profit after tax declined by 3% and 6%, respectively.
- Home Care grew 1%, Beauty and Personal Care declined by 2%, Foods and Refreshment had positive pricing and delivered mid-single-digit USG.
- Margins remained healthy in all three segments.
Key Thrust Areas and Business Strategy:
- Focus on growing the core through unmissable brand superiority.
- 19 brands with turnover over INR 1,000 crores each.
- Embarked on a journey of making brands unmissably superior.
- Market making and premiumization focus through persuasive communications, innovating in new demand spaces, and educating consumers.
- Strong portfolio leading growth, contributing to more than 25% of business.
- Transformation in Beauty segment focusing on contemporizing master brands, investing in high-growth demand spaces, and embedding core capabilities.
- Leveraging capabilities to outperform in the Beauty segment.
- Continuous focus on premiumization, innovation, and market penetration.
- Expecting improvements in rural consumption with better monsoon and macro-economic indicators.
- Optimistic outlook for the future with a focus on driving competitive growth and maintaining margins.
Segment Performance:
- Laundry Segment: Powders continue to grow in volume, liquids growing ahead due to faster conversion, bars returning back to growth, focus on premiumization.
- Health Food Drinks (HFD): High single-digit growth driven by pricing and volume growth, Nutrition Plus range accelerating growth, efforts to build consumption yielding results.
- Beauty Segment: Mid-single digit growth, premium portfolio growing in double digits, pioneers in liquids category, focus on premiumization and innovation.
- Soaps Business: Sharp decline in performance, actions taken to address low unit price value equation, premium brands performing well.
- Personal Care Segment: Decline in mass end of the portfolio, premium portfolio showing stronger growth, continued focus on building penetration and consumption in key categories.
- Horlicks and Health Food Drinks: Significant efforts in building penetration and consumption for Horlicks, focus on building premium portfolio and driving growth in the adult space.
Market Share and Channel Strategy:
- Gaining market share in the Beauty and Personal Care segment.
- Recovering market share in categories like mass skin cleansing and detergent bars.
- Focusing on building penetration and consumption in key categories.
- Channel split: under 70% in general trade, under 20% in modern trade, around 6-7% in e-commerce.
- E-commerce growing fastest, followed by modern trade and general trade.
- Quick commerce segment gaining traction within e-commerce.
- Focusing on high margin portfolio in quick commerce, beauty commerce, and marketplace.
Outlook and Future Plans:
- Expecting gradual improvement in FMCG demand.
- Forecast of above-normal monsoons and improving macro-economic indicators.
- Price growth expected to be low single-digit decline in near term.
- Focus on driving competitive volume-led growth across business.
- Actions underway to address performance in the skin cleansing segment.
- No immediate plans for price increase due to deflation in commodity basket.
- Planning for low single digit price increase in the second half of the financial year.
- Targeting 23-24% EBITDA margin band, with focus on maintaining current levels in the short term and modest margin improvement in the medium to long term.
- Unilever planning to separate the ice cream business by second half of 2025, further decisions and strategies to be communicated in the future.
5 Year and 10 Year Median P/E is 64 ad 61. Long Term Median P/E is 47.
Valuations are at 10 Year Low P/E of about 53 at the moment.
5 Year Sales and PAT Growth is 10% and 11%, and Stock Price CAGR is 6%. Slow growth will continue for some time. Price CAGR will depend of P/E re-rating.
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