Hindustan Unilever (HUL) Q4CY08 robust topline performance (up 17% y-o-y), and marginal dip in earnings (-2.5%) was largely in line with estimates.
The highlight for CY08 - 19.2% y-o-y revenue growth - was spearheaded by 12.7% value and 6.5% volume -led growth. Though soaps and detergents (47.5% of revenues) reported 17% y-o-y growth, the underlying volume growth was disappointing at 2%.
The company has cut prices of soaps and detergents by 4-6% in 2009 in a bid to salvage volume performance.
Despite factoring in an overall 6% growth in the segment, and continued strength in personal products and foods business (15%+), HUL’s CY09E sales performance is set to be capped at 10%, with PAT growth of about 12% y-o-y.
Thus, at our forecasted EPS of Rs10.8, the stock trades at over 24x CY09E. Though HUL is a good hedge in the current volatile environment, the upside is capped in the near term at Rs270 (25x CY09E). Recommend SELL.