Analysts see HLL posting flat sales, 16% higher PAT

Our Bureaus

Mumbai, Oct 15: Hindustan Lever Ltd (HLL) is expected to announce a flat third quarter sales growth on Tuesday, say industry analysts who see the company’s revenue growth in the region of 1-6 per cent, and a bottomline growth of about 15-16 per cent against the same period last calendar year.

The company’s board of directors meets on Tuesday to approve the unique bonus debentures issue, raising the foreign institutional investors’ (FII) limit to 49 per cent while also to announce the company’s performance during the third quarter period ended September 30, 2001.

Analysts are of the opinion that this quarter would see a better performance in HLL’s core businesses of home and personal care products. Most analysts feel the company’s move to focus on the select power brands has clicked and it will pay off during the period under consideration.

Pranav Securities analyst (FMCG) Nisha Khushalmi said: “We expect a topline growth of 1.5 per cent and with higher margin a bottomline growth of 25 per cent.”

Another analyst predicts HLL will post a revenue growth of 6 per cent to Rs 2,600 crore (Rs 2,462 crore in third quarter, 2000), and a flat bottomline of Rs 330 crore (Rs 331 crore in third quarter, 2000).
Analysts also said that the positive indication of an impending upsurge in economy and a good monsoon has sown the seeds of a better fourth quarter performance.

An analyst at a European brokerage house said: “We expect a rise of 2.8 per cent in sales for the third quarter and net profit rise of 18 per cent. The sharp rise in net profit despite flat sales is largely contributed through margin expansion, which, I expect to be around 140 basis points (bps) rise and lower tax effect. Cost efficiency and margins in the 30 power brands is also the reason of aberration in sales figures and the PAT figure.”

According to an ASK Raymond James’ earnings expectations on the FMCG sector: “Unilever, in its third quarter 2001 pre-result conference call mentioned that its Asia Pacific operating margins would be hit by 200 bps on account of ‘launch’ activity and the depreciation in currencies. Hence, we could be surprised negatively on account of HLL’s third quarter for calendar year 2001 EBITDA growth performance.”

Some analysts feel that tea and soaps will suffer a negative growth compared to the same quarter last year, while shampoos, personal products and branded foods will see a growth in volume.

The fanciness towards the stock is seen improving following the proposal to hike the FII limit to 49 per cent from the existing 24 per cent. “Our price target for the stock is 250 in a time period of three months. Over 230 levels the stock comes under trading range. Book profit over 230 levels as runaway gains is not expected. The sharp rise in net profit in the third quarter to 2001 as compared to flat topline growth is on the back of cost efficiency, mainly contributed by its 30 power brand products,” Ms Kushalmi added.

Said Ms Shalini Gupta of Motilal Oswal Securities: “HLL’s move to issue bonus debentures indicates company’s intention to pay out the existing cash on its balance sheet — nothing more and nothing less. We believe one of the key moving factors behind gifting its shareholders with this bounty is to get a better looking balance sheet, one which truly reflects the company’s profitability.”