Share Khan on Hindustan Unilever
Prices levered up!
Hindustan Unilever Ltd (HUL) has hiked the prices of select products (stock-keeping units [SKU]) across categories, effective from October-end to the beginning of November 2008. The price increase has been implemented primarily in shampoo, detergent and toothpaste categories. In the quarter gone by (July-September 2008) HUL’s operating margins contracted by 154 basis points year on year (yoy), as the raw material cost as percentage to the sales increased by 112 basis points. This is despite the fact that the company has been continuously effecting steep price hikes across product categories, particularly from July 2008 (July-September 2008 quarter had a 12.9% year-on-year average increase in the prices). The steep increase in the prices of key raw materials such as palm oil, LAB, caustic soda, soda ash, raw tea, coffee and crude oil derivatives has led the company to implement these price increases to protect its margins.
Hindustan Unilever
Cluster: Apple Green
Recommendation: Buy
Price target: Rs280
Current market price: Rs234
-From Share Khan investor note.
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