HUL

The stock hit a new high the day after the numbers the declared. But that had nothing to do with the Q4 numbers; it was only because the parent company, Unilever Plc announced that it would be buying back of 22.52% of HUL at Rs.600/share, which was at a premium of about 21% over previous day’s closing price. The offer has been made to help promoters increase their stake from current 52.48% to 75%. The offer, payable in cash, is expected to begin in June 2013 and at $5.4 billion would be the largest equity offer ever in India. In the euphoria of this announcement, everyone quite forgot the Q4 numbers which were good but impressive. While commodity costs were relatively benign during the quarter, competitive intensity remained at high levels. Advertising and promotions cost was up and it ended the quarter with a 15% rise in net profit at Rs.787 crore.

In terms of segmental growth, soaps and detergents grew 13%, personal products grew 12%, accelerated by growth in hair and oral care products. Beverages grew 18% and packaged food grew 7% led by Kissan Ketchup. Looking ahead of this performance and the share buy back, challenges of inflationary pressure, low consumer spending and consistently increasing royalty will remain. Increasing competition will also mean increased ad spend  and it is volume growth which will drive profitability.  All said and done, this is one of the best listed stocks in the FMCG sector, truly blue blooded. Thus makes sense to hold on in your long term portfolio.