At the outset, we wish a very happy and prosperous 2017 to the readers of The Sunday Guardian. Expect the unexpected, as the year ahead is going to be dominated by things or events that were not in the radar a year ago. Demonetisation or Brexit, for instance, hadn’t even been announced or remotely thought of. To sum all this up is not going to be easy in the absence of clarity about major investing themes for the next 12 months. For investors, it is going to be a challenging year and analysts feel that quality will rule in the stock market as we have seen that sudden circumstances (read demonetisation) lead to temporary disruption. It would be prudent to take advantage of opportunities to pick up individual stocks at advantageous prices. Therefore, we should look for big brands and Warren Buffett-style moats, and preferably look for the two together. Companies such as Hindustan Unilever should continue to serve patient investors well.
Hindustan Unilever Limited (HUL) is India’s largest fast moving consumer goods (FMCG) company, with a heritage of over 80 years in India and touches the lives of two out of three Indians. HUL works to create a better future every day and helps people feel good, look good and get more out of life with brands and services that are good for them and good for others. With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skincare, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream and water purifiers, the company is a part of the everyday life of millions of consumers across India. Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Wheel, Fair & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan and Kwality Wall’s. The company has over 18,000 employees and had an annual turnover of Rs 31,425 crore for the last financial year. HUL is a subsidiary of Unilever, one of the world’s leading suppliers of fast moving consumer goods with strong local roots in more than 100 countries across the globe, with an annual sales of over 53.3 billion. Unilever has a 67.2% shareholding in HUL. The company strongly believes that demonetisation and GST are significant growth drivers for the country and a win-win situation for everyone. While near term market growth performance will be under pressure, however, it will be staying close to the customers and investing behind growth.
Demonetisation has created temporary pain in the short term, impacting lower cash in hand with consumers. They are cautious with their spend and spending only on basic necessities. Wholesale stocking has also seen a major impact across geographies. In spite of this short term disruption, the HUL stock is an attractive medium term buy for 2017. The stock currently quoting at Rs 825 can give a 15% price appreciation in the next 2-3 quarters.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.