HUL vs ITC (Who is the winner?)
Would you use Aashirwad aata or Annapurna aata, Salvon sanitiser or Lifebuoy Sanitizer? These products are from two FMCG (Fast moving consumer goods) conglomerates that have been going neck to neck in terms of products and features in the past few years.
Brief history of the FMCG sector:
FMCG sector is the fourth largest sector in India. About 50% of India’s growth is derived from sales of household and personal care products that fall under FMCG. FMCG sector has most of its customers in the urban areas, with around 55 per cent of the revenue share. FMCG sector is expected to grow by 14% in the next 3 years, major drivers are rising internet connectivity, acceptance of e-commerce platforms for trade.
HUL Overview
Business breakdown of HUL:
• Beauty and Personal care segment (42% of revenue)
• Home care segment (29% of revenue)
• Foods and Refreshments segment (29% of revenue)
The company's brands are available across 80 lakh+ stores across India and around 90% of all households in India use 1 or more of HUL’s products.
ITC Overview
Business breakdown of ITC:
• Cigarettes sales (45% of revenue)
• Packaged foods, personal care, and other FMCG (28% of revenue)
• Hotel business segment (4% of revenue)
• Agri Business segment (13% of revenue)
ITC is the leader in the organised domestic cigarette market with a market share of over 80%.
Comparing ITC and HUL:
We will be considering a few ratios to determine the financial state of these companies.
• ROE: Return on Equity is a measure of a company's financial performance that shows the relationship between a company's profit and the investor's return. HUL’s ROE is around 18.3% in 2022 and has a 5-year average of 58.5% compared to ITC’s 25.6% Return in 2022 and a 5-year historical average of 24.17%
• ROCE: Return on capital employed, this ratio indicates how efficient the company is in utilising its capital resources. Two types of resources majorly contribute to a company’s growth. These are human resources and capital resources. The ROCE is an excellent parameter that measures a capital-intensive company’s performance. ITC’s ROCE
33.2% for FY22 and a 5-year average of 32.3% against HUL’s 24.6% for FY22 and a 5-year average of 80.77%.
