Motilal Oswal's research report on Hindustan Unilever
HUVR’s operating performance in 3QFY23 was in line with expectations. PBT and PAT beat our estimates by ~8%, driven by higher-than-expected other income. On the effective 80bp increase in royalty (effective for the next five years) from 2.65% to 3.45%, we are not particularly perturbed if HUVR receives commensurate benefits from the parent. The decision also requires a majority of minority shareholders’ approval and is not a CG risk in our view. Even at 3.45% royalty by CY27, HUVR’s royalty rate will be well below that of NEST/CLGT/PGHH (close to ~5%). While rural recovery and commodity cost declines are taking longer than expected, management believes that the worst is over and HUVR will be a clear beneficiary on both fronts. Maintain Buy.
Outlook
Maintain Buy with a TP of INR3,100 (55x FY25E EPS).
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