Hindustan Unilever Ltd Long Term Buy Call: Abhishek Jain, StocksIdea.com

Hindustan Unilever Ltd Long Term Buy Call: Abhishek Jain, StocksIdea.comHindustan Unilever Ltd. country's leading fast moving consumer goods company and amongst those enjoying the largest branded market coverage, is a 51% subsidiary of Unilever Plc, UK. In 2000 Company launched the International Lux Skincare range, "Sunscreen Formula". In this year only HUL acquires Modern Foods, the first public sector company to be divested by the Government of India. For "Clinic All Clear" on the Net, Hindustan Unilever has launched a host of Web Promotions on popular Websites that include Rediff.com, Sify.com, Indya.com, Uthplanet.com, Hungama.com and C2W.com. Company also launched Clinic plus Protein Shampoo with a new formulation that contains a Protein Health Complex. Company launched the new Lakme Sunscreen Lotion with ultraviolet rays guard and Alpine Mint. Company forays into snack foods market under the Knorr Annapurna brand. In 2003 it acquired the seafoods business of the south-based Amalgam group. Company also made entry into conventional biscuits market by launching a traditional glucose biscuit under its acquired bakery brand Modern. Company started a Ayurvedic science center - Ayush Therapy Centre - to provide a platform for scientific enquiry of Ayurveda and dissemination of this knowledge through collaborations with leading national and international scientific, Ayurvedic and medical experts and institutions. Company also introduced iced tea in glass bottles.

Products & services:

Hindustan Unilever Limited is India's largest fast moving consumer goods company with leadership in Branded Home & Personal Care Products and Foods & Beverages. HUL is India's largest marketer of soaps and detergents. It has the country's largest personal products business, leading in shampoos, skin care products, color cosmetics, deodorants and fragrances. It is also the market leader in tea, processed coffee, branded wheat flour, tomato products, ice cream, jams and squashes. It also has a presence in specialty & bulk chemicals, animal feeding stuff and fertilizers. HUL commands over 50% market share in branded soaps and has presence in all
segments. Company has strong presence in detergents and hair care segments. With aggressive advertising and promotions it has acquired good brand value in the Indian FMCG market. HUL's brands spread across 20 distinct consumer categories touch the lives of two out of three Indians. Company manufactures and markets many products into different categories - Home & personal care, Foods, Hindustan Unilever network, Exports, Water, Enablers.

Home & personal care- Company has strong brands like Lux, Lifebuoy, Liril, surf excel, rin, wheel, hamam, breeze, dove, pears, rexona, Fair's & lovely, ponds, sunsilk naurals, clinic, Axe, rexona, pepsodent, lekme, closeup, ayush etc in this segment.

Foods- Company is making strong presence into this category. Brands are Kissan, knorr annapurna, kwality wall's, bru, lipton, brooke bond etc. Hindustan Unilever network- company's direct selling arm. It has about 4 lakh consultants - all independent entrepreneurs, trained and guided by HULN's expert managers and trainers. HULN
has a network into 1600 towns and cities, backed by over 45 offices and over 300 service centers across the country.

Exports- Company is a sourcing base for Unilever brands in Home & Personal Care and Tea for supplies to other Unilever companies. It also focuses on becoming a preferred supplier to both non-Unilever and Unilever clients in three categories in which India as a country has competitive advantage - Marine Products, Castor and its Derivatives and Rice. HUL enjoys international recognition within Unilever and outside for its quality, reliability and speed of customer service. HUL's Exports geography comprises, at present, countries in Asia, Australia, Africa, North America and Europe.

Company Exports following products:

Home & personal care: The categories are soaps; skin care products and oral care products. The brands are Lux, Lifebuoy, Pears, Fair & Lovely, Dove, Vaseline, Close-Up, Pepsodent, Signal. HUL is the only source of Pears soap across the world.

Tea: The categories are branded packet tea, and instant tea for Unilever's ready to drink tea business. The branded teas are Brooke Bond, Brooke Bond Red label, Brooke Bond Taj Mahal, Lipton, Lipton Yellow Label, Lipton Green Label, Lipton Brisk, Lipton 3-in-1 premix, Chinese Rickshaw.

Marine Products: HUL offers a comprehensive portfolio, ranging from Surimi, Crabsticks to Shrimps and several value-added products. Among its customers is Icelandic, the world's third largest seafood company. HUL has become a part of Unilever's supply chain in seafoods for Europe too. HUL's Marine Products brands are Ocean Diamond, Ocean Excellence, Shogun, Hima, Gold Seal, Tara and Prima.

Rice: The categories are Basmati Rice and Basmati Rice-based ready-to-eat rice meals. The brands are Gold Seal Indus Valley, Rozana and Annapurna.

Castor: The categories are Castor Oil; Castor oil based products, like hydrogenated castor oil, 12 - Hydroxy Stearic Acid, Ricinoleic Acid and Speciality Castor Oils etc used in pharmaceutical preparations. HUL's Castor brand is Topsol.

Water- Company has launched Pureit, the most advanced in-home water purifier in the world. Only purifier that gives water as safe as boiled water without boiling and without needing electricity or continuous tap water supply. It is the most advanced in home water purifier in the world. Pureit gives water that is free from viruses, bacteria and parasites because it has a Pureit Germkill Battery TM that is a combination of unique technological breakthroughs. Projects- in 1998, Hindustan unilever launched Project Streamline to further extend its distribution reach. Company identifies sub stockists in a large village, connected by motorable road to a small town. This sub-stockist in turn distributes the company's products to outlets in adjacent smaller villages using transportation suitable to interconnecting roads, like cycles,
scooters or the age-old bullock cart. Hindustan unilever is trying to circumvent the barrier of motorable roads. As a result, the distribution network, as of now, directly covers about 50,000 villages, reaching about 250 million consumers. The company simultaneously uses the wholesale channel, suitably incentivising them to distribute company products.

Valuation:

Input cost pressures are going down and margins are improving. We expect, this trend to continue till next financial year. At current market price, stock is trading at valuation of 19.4 X multiple of its FY2010 Estimated earnings and with strong dividend yield. We recommend investors to "Buy" "Hindustan Unilever Ltd." with medium to long-term investment horizon.