Hindustan Unilever (HINLEV)

CMP: | 2,483 Target: | 2,800 (13%) Target Period: 12 months HOLD

November 20, 2022

Premiumisation, category development key to growth

About the stock: Hindustan Unilever (HUL) is the biggest FMCG company in India

Company Update
with more than 50 brands across categories. It is the market leader in fabric wash,
personal wash, cosmetics, shampoos and many other categories. Particulars
Particular (| crore) Amount
 Presence in 15 categories with more than 50 brands, out of which 16 clock Market Capitalization 5,83,414.8
sales of more than | 1000 crore Total Debt (FY22) 0.0
Cash and Investments (FY22) 7,128.0
 The company has a distribution reach of ~9.0 million (mn) outlets out of
EV 5,76,286.8
total 11 mn with a direct network of more than 3.5 mn
52 week H/L (|) 2733 / 1901
Equity capital 235.0
Analyst Meet takeaways: We attended HUL’s analyst meet to get a sense of Face value |1
backroom work behind mammoth scale of marketing, distribution & manufacturing.
Shareholding pattern
 Market leadership in more than 85% of its business; i.e. market leader in
(in % ) Dec-21 Mar-22 Jun-22 Sep-22
eight categories and No. 2 in four categories
Promoter 61.9 61.9 61.9 61.9
 Established 19 new brands in the last 10 years; market development FII 14.7 13.7 13.3 13.7
categories contributing | 10,000 crore (20%) to total sales DII 10.9 11.6 12.2 11.7
Others 12.5 12.8 12.6 12.7
 Driving premiumisation; contribution up to 33% from 22% in a decade
Price Chart
What should investors do? HUL’s share price has gone up by 96% over the past
3000 20000
five years (from | 1265 in November 2017 to | 2481 levels in November 2022).

ICICI Securities – Retail Equity Research

2000
 We maintain our HOLD rating on the stock 10000
1000
Target Price and Valuation: We value HUL at | 2800 i.e. 60x P/E on FY24E EPS. 0 0

May-18

May-19

May-20

May-21

May-22
Nov-17

Nov-18

Nov-20

Nov-21

Nov-22
Nov-19
Key triggers for future price performance:
 Home care categories have grown through premiumisation in the last HUL NIFTY
decade with premium laundry contributing 52% of volumes in 2021 vs. 31%
Recent event & key risks
in 2010. The segment has seen market share gains of 500 bps
 Termination of contract for GSK
 Digital demand capture is 25% of total sales with e-commerce contributing
OTC product distribution from
7-8% of sales. The biggest lever in digital demand capture is eB2B app
November 2023 (18 months
‘Shikhar’ utilised by 1 million stores
ahead of time)
 In the last one year, HUL has taken a 12% price hike to counter 22% material
 Key Risk: (i) Higher crude,
inflation. It has been able to drive savings to the tune of 7% through cost
adverse currency movement
rationalisation measure. HUL is looking to recoup lost gross margins
may continue to pressurise
margins ii) Rural growth revival
Alternate Stock Idea: Besides HUL, we like TCPL in our FMCG coverage.
may see faster volume recovery
 Strong innovation & premiumisation strategy in salt, tea, Sampann & Soulful
Research Analyst
in the Indian market expected to drive sales & margins
 We value the stock at | 950 with BUY rating Sanjay Manyal
[email protected]

Key Financial Summary

5 year CAGR 2 Year CAGR
Key Financials FY20 FY21 FY22 (FY17-22) FY23E FY24E (FY22-24E)
Total Operating Income 38785.0 45996.0 51193.0 8.2 58753.6 63771.4 11.6%
EBITDA 9600.0 11324.0 12503.0 15.6 13901.8 15378.5 10.9%
EBITDA Margin % 25.1 25.0 24.8 24.1 24.5
Net Profit 6738.0 7954.5 8818.0 11.9 9972.5 10934.1 11.4%
EPS (|) 31.19 33.86 37.53 10.0 42.45 46.54 11.4%
P/E 79.6 73.3 66.2 58.5 53.4
RoNW % 85.7 17.1 18.1 20.3 22.0
RoCE (%) 89.5 18.9 20.2 22.8 25.1
Source: Company, ICICI Direct Research
 Company Update | Hindustan Unilever ICICI Direct Research

Analyst meet key takeaways

Analyst Meet: Market development categories contributing 20% of sales
 HUL has grown revenues at 9% CAGR with 5% volume CAGR in the last
decade. It has seen 1000 bps operating margin improvement driven by
premiumisation trend largely in fabric care and market development of
margin accretive categories with large growth potential

 The company has introduced and established 19 new brands (including

brand extensions & acquisitions) across brands in the last 10 years present.
These include five digital first brands (‘Simple’, ‘Baby-Dove’, ‘Love Beauty
And Planet’, ‘ACNESQUAD’ & ‘Find Your Happy Place’)

 Market development of many categories such as liquid fabric wash, matic

detergent, hand & body wash, green tea, spice tea, spread & dressings,
premium skin care, premium hair care and premium colour cosmetics, are
now contributing | 10,000 crore to sales

 Overall premium products are contributing 33% to sales in FY22 vs. 22% in
FY12. Moreover, digital demand capture is close to 25% vs. nil a decade ago

 In beauty & personal care (BPC) segment, the company has seven | 1000
crore turnover brands. i.e. ‘Glow & Lovely’, ‘Lifebuoy’, ‘Dove’, ‘Ponds’, ‘Lux’,
‘Clinic-Plus’ and ‘Lakme’
 The company has adopted the strategy of Winning in Many India (WIMI),
leveraging digital capabilities and innovations (new product & category
launches) to grow ahead of market

 HUL is driving premiumisation in skin cleansing through accelerating liquid

format adoption in hand & body wash. Moreover, continuing focus on shift
from core (Lux, Lifebuoy) to premium (Dove) in bars

 Hair care (largely shampoos) category market share is highest in two

decades. The company has gained 400 bps market share in the last three
years. HUL is 3x its largest competitors in the category

 The company is developing market in skin cleansing, body lotions & hair
conditions given penetration levels are merely 22%, 14% & 7%,
respectively, with the opportunity of growing penetration to 2x in future

 The company is focusing on some nascent categories like light moisturisers,

BB/CC creams, Sunscreen, body wash & intimate hygiene in the next
decade. The penetration levels in these categories are in low single digit

 Home care category sales & profits have grown 2.6x & 7.3x in the last decade
with 500 bps market share gains. The company saw 1000 bps improvement
in segment margin in the last six years largely through premiumisation
 In home care, HUL’s volume contribution from premium laundry has done
up from 31% in 2010 to 52% in 2021 whereas mass laundry volume
contribution has come down from 58% in 2010 to 33% in 2021. Dish wash
volume has gone up from 11% to15% in a similar period

 Pricing index in fabric wash is ranging from 0.8x to 2x. Surf Excel is poised
to become a US$1 bn brand. Fabric wash liquid (Surf excel & Rin) business
is more than | 2000 crore

 In the fabric wash category, 68% of overall market volume constitutes the
mass segment whereas mid-price & premium category constitutes 18% &
14%, respectively. HUL’s market share in the premium segment (Surf-Excel)
is 3.5x of mass segment (Wheel) & 1.7x of mid-priced category (Rin)
 Foods & refreshment category growth has been at 8.5% CAGR in the last
nine years whereas segment margin has improved from 720 bps in the
similar period. It has seen market share gains of 450 bps in Brook Bond Tea,
350 bps in Kissan ketchup, 100 bps in Kwality Walls in the last six years.
Horlicks & Boost brand have seen market share gains of 150 bps in the last
one year

ICICI Securities | Retail Research 2

 Company Update | Hindustan Unilever ICICI Direct Research

 The growth strategy in F&R remains similar to other categories. It is focusing

on market development of new categories spreads (Mayonnaise, Peanut
butter, Gummies, Green Tea and Coffee)

 In the last six years, HUL has gained significant market share in the tea
segment becoming No. 1 in the segment in value market share. The
company is driving growth in ‘Taaza’ brand by converting loose
consumption to branded. Loose tea constitutes 30% of the total tea market

 In foods, Kissan & Knorr brands have been extended to adjacencies like
peanut butter, Schezwan Sauce, Pizza & Pasta Sauce. The company has
been holding more than 10% market share in modern trade in mayonnaise
and more than 15% market share in Peanut butter in South India

 HFD category has seen 200 bps volume market share gain since acquisition.
HUL is driving penetration with 200 bps increase to 21.8% since acquisition.
Direct coverage has increased by 3x, with e-commerce run rate up 11x and
numeric distribution has increased to 1.3x. However, HFD category growth
was adversely impacted by high inflation in the last three quarters. The
company is driving penetration through | 5 & |10 price point smaller packs

 HUL has terminated OTC product distribution contract of GSK brands

(Crocin, ENO, Iodex, Otrivin & Sensodyne) from November 8, 2023 (1.5
years ahead of contract duration). The company generates | 300 crore of
gross income from these products along with some distribution expense.
This would adversely impact earnings in FY24

 Commodity inflation in the last one year was unprecedented and many of
these RMs are still closer to 10 years high. Palm oil & tea prices have
softened from the peak. However, crude, soda ash, barley, milk & other key
raw material prices remain at elevated levels

 HUL has been using Jarvis model to understand impact on volumes with
price hikes and the company has been able to optimise price-volume
equation with this data driven model

 The company is looking to build back gross margin, which is 600 bps below
Septmeber-2021 level by bridging the price cost gap. It would scale up
advertisement for core category growth, market development

Exhibit 1: Peer Comparison

CMP TP M Cap Sales growth (% ) EBITDA Margins (% ) P/E(x) RoE (% ) RoCE (% )
Sector / Company
(|) (|) Rating (| Cr) FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E
Hindustan Unilever (HINLEV) 2483 2800 Hold 583415 11.3 14.8 8.5 24.8 24.1 24.5 66.2 58.5 53.4 18.1 20.3 22.0 20.2 22.8 25.1
Colgate (COLPAL) 1583 1610 Hold 43,606 5.3 5.4 8.2 30.9 29.3 29.5 39.9 41.0 37.4 62.2 62.9 70.8 77.8 82.6 92.7
Tata Consumer Products (TATGLO) 776 950 Buy 70169 7.1 10.9 10.4 13.8 13.9 15.0 70.4 55.7 45.3 7.0 8.2 9.7 8.4 9.2 10.8
ITC Limited (ITC) 341 405 Buy 4,29,858 23.1 19.4 6.8 32.0 32.5 35.5 27.5 23.9 20.5 24.5 27.1 29.7 31.4 35.3 38.8
Source: Company, ICICI Direct Research

HUL has seen mid-single digit volume growth along with similar pricing growth over
the years. The biggest reason for its outperformance in the last decade has been
1000 bps margin expansion by driving premiumisation trend in fabric care, skin
cleanings, hair care & foods. The company has also established many nascent
categories with low penetration and high opportunity size. HUL would be driving
growth over the next decade through these categories. Though acquisition of
nutrition portfolio has not seen any major gains in the last three years, the company
is looking to drive penetration led growth in this segment through smaller packs. We
believe HUL would be able to leverage Horlicks, boost brands by extending these in
other related products in health food space. With the softening of some commodity
prices and expected cool off in other commodities, the company would be able to
build back gross margins in the next few quarters and increase spending towards
advertisement & promotions in future. We believe HUL is poised to leverage its
brands, mammoth distribution network & digital capabilities to drive growth &
improve margin. We maintain our HOLD rating and target price of | 2800/share

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 Company Update | Hindustan Unilever ICICI Direct Research

Exhibit 1: Segment revenue contribution & major brands

Source: Company, ICICI Direct Research

Exhibit 2: Develops 19 new brands in last 10 years including five digital first brands

Source: Company, ICICI Direct Research

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 Company Update | Hindustan Unilever ICICI Direct Research

Exhibit 3: Premiumisation results in 1000 bps margin expansion in last decade

Source: Company, ICICI Direct Research

Exhibit 4: Market development categories contributing |10,000 crore of HUL’s sales

Source: Company, ICICI Direct Research

Exhibit 5: Seven | 1000 crore turnover brands in BPC segment

Source: Company, ICICI Direct Research

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 Company Update | Hindustan Unilever ICICI Direct Research

Exhibit 6: Hair care 400 bps market share gain in last three years

Source: Company, ICICI Direct Research

Exhibit 7: Establishing categories for future; most have low penetration & high
opportunity size

Source: Company, ICICI Direct Research

Exhibit 8: Premiumisation in home care scales up segment margins by 1000 bps in

last six years

Source: Company, ICICI Direct Research

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 Company Update | Hindustan Unilever ICICI Direct Research

Exhibit 9: Premium fabric care market still low in volumes with high growth potential
; liquid detergents contributing | 2000 crore to sales

Source: Company, ICICI Direct Research

Exhibit 10: Gains market share & leadership in tea segment in last six years

Source: Company, ICICI Direct Research

Exhibit 11: Ice cream sales recover sharply from Covid lows

Source: Company, ICICI Direct Research

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 Company Update | Hindustan Unilever ICICI Direct Research

Exhibit 12: HFD category distribution enhances post acquisition

Source: Company, ICICI Direct Research

Exhibit 13: Most commodities still remain at elevated levels

Source: Company, ICICI Direct Research

Exhibit 14: Price hikes taken in last one year to counter RM inflation

Source: Company, ICICI Direct Research

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 Company Update | Hindustan Unilever ICICI Direct Research

Key Metrics

Exhibit 15: Home care revenue (| crore), YoY growth (%)

q
Exhibit 16: Personal care revenue (| crore) & growth (%) trend

24000 22430 25.0 12.0

20391 25000 23333
21406 10.0
20000 16578 20.0 19460
20000 17655 17345 17964 8.0
16132
16000 12876 13642 13959 15.0 6.0
11464 15000
12000 4.0
10.0 10000 2.0
8000
0.0
4000 5.0 5000
-2.0
0 0.0 0 -4.0
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY18 FY19 FY20 FY21 FY22 FY23E FY24E

Home Care Sales (LHS) Home Care Sales Growth (RHS) Personal care Sales (LHS) PC Sales Growth (RHS)

Source: ICICI Direct Research, Company Source: ICICI Direct Research, Company

Exhibit 17: Foods & refreshment revenue (| crore) and growth (%) trend
18000 15848 90.0
16000 14951 80.0
14105
13204
14000 70.0
12000 60.0
10000 50.0
7133 7450
8000 6425 40.0
6000 30.0
4000 20.0
2000 10.0
0 0.0
FY18 FY19 FY20 FY21 FY22 FY23E FY24E

Foods & Refreshment Sales (LHS) Foods & Refreshment Growth (RHS)

Source: Company, ICICI Direct Research

Exhibit 18: EBITDA margin and raw material trend Exhibit 19: PAT to grow at CAGR of 11.4% in FY22-24E

26.0 25.1 25.0 24.8 54.0 12000 10934 30.0

24.5 9973
25.0 24.0 24.1 52.0 10000 8818 25.0
24.0 52.6 7955
23.0 50.0 8000 6546 6738 20.0
21.4 5237
22.0 49.1 48.0 6000 15.0
21.0 48.5
47.0 47.1 46.0 4000 10.0
20.0 46.4 45.9 44.0 2000 5.0
19.0
18.0 42.0 0 0.0
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY18 FY19 FY20 FY21 FY22 FY23E FY24E

EBITDA margin (%) - LHS RM cost to sales (%) - RHS PAT (| crore) - LHS PAT Growth (YoY)

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

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 Company Update | Hindustan Unilever ICICI Direct Research

Financial Summary

Exhibit 20: Profit and loss statement | crore Exhibit 21: Cash flow statement | crore
(Year-end March) FY21 FY22 FY23E FY24E (Year-end March) FY21 FY22 FY23E FY24E
Total operating Income 45,996.0 51,193.0 58,753.6 63,771.4 Profit after Tax 8,123.0 9,019.0 9,972.5 10,934.1
Growth (%) 18.6 11.3 14.8 8.5 Add: Depreciation 1,069.0 1,040.0 1,098.0 1,140.3
Raw Material Expenses 21,677.0 25,124.0 30,922.1 30,952.3 (Inc)/dec in Current Assets -866.0 -992.0 -1,481.1 134.8
Employee Expenses 2,229.0 2,399.0 2,543.2 3,074.1 Inc/(dec) in CL and Provisions 810.0 203.0 1,249.4 2,072.6
Marketing Expenses 4,737.0 4,718.0 4,913.0 6,461.8 CF from operating activities 8,957.0 8,964.0 10,838.8 14,281.8
Administrative Expenses 0.0 0.0 2,427.6 3,011.3 (Inc)/dec in Investments -1,467.0 -1,096.0 -100.0 -100.0
Other expenses 6,029.0 6,449.0 4,046.0 4,893.4 (Inc)/dec in loans & advances -532.0 -770.0 -25.0 -25.0
Total Operating Expenditure 34,672.0 38,690.0 44,851.9 48,392.9 (Inc)/dec in Fixed Assets 0.0 0.0 -1,097.0 -1,140.3
EBITDA 11,324.0 12,503.0 13,901.8 15,378.5 Others 632.0 134.0 -111.0 24.4
Growth (%) 18.0 10.4 11.2 10.6 CF from investing activities (1,367.0) (1,732.0) (1,333.0) (1,240.9)
Depreciation 1,012.0 1,025.0 1,098.0 1,140.3 Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0
Interest 108.0 98.0 88.2 79.4 Inc/(dec) in loan funds 0.0 0.0 0.0 0.0
Other Income 513.0 393.0 440.2 493.0 Dividend paid & dividend tax -8,811.0 -7,519.0 -9,400.0 -10,340.0
Exceptional Income -226.5 -34.0 -34.0 -34.0 Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0
PBT 10,490.5 11,739.0 13,121.7 14,617.8 Others -469.0 -465.0 0.0 0.0
Total Tax 2,536.0 2,921.0 3,149.2 3,683.7 CF from financing activities (9,280.0) (7,984.0) (9,400.0) (10,340.0)
PAT 7,954.5 8,818.0 9,972.5 10,934.1 Net Cash flow -1,390.0 -752.0 105.8 2,700.9
Growth (%) 18.1 10.9 13.1 9.6 Opening Cash 3,130.0 1,740.0 988.0 1,093.8
EPS (|) 33.9 37.5 42.4 46.5 Closing Cash 4,321.0 3,618.0 3,723.8 6,424.7
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 22: Balance Sheet | crore Exhibit 23: Key ratios

(Year-end March) FY21E FY22 FY23E FY24E (Year-end March) FY21 FY22 FY23E FY24E
Liabilities Per share data (|)
Equity Capital 235.0 235.0 235.0 235.0 EPS 33.9 37.5 42.4 46.5
Reserve and Surplus 47,199.0 48,525.0 49,097.5 49,691.6 Cash EPS 38.2 41.9 47.1 51.4
Total Shareholders funds 47,434.0 48,760.0 49,332.5 49,926.6 BV 201.9 207.5 210.0 212.5
Other Non Current Liabilities 2,304.0 2,339.0 2,339.0 2,339.0 DPS 27.0 34.0 40.0 44.0
Long Term Provisions 1551.0 1553.0 150.0 164.4 Cash Per Share 18.4 15.4 15.8 27.3
Total Liabilities 57,275.0 58,793.0 57,972.5 58,591.0 Operating Ratios (% )
Assets EBITDA/Total Operating Income 25.0 24.8 24.1 24.5
Gross Block 9,305.0 10,357.0 10,557.0 10,757.0 PBT Margin 23.3 23.0 22.4 23.0
Less: Acc Depreciation 3,519.0 4,544.0 4,544.0 4,544.0 PAT Margin 17.3 17.2 17.0 17.1
Net Block 5,786.0 5,813.0 6,013.0 6,213.0 Inventory days 27 28 30 25
Capital WIP 623.0 901.0 700.0 500.0 Debtor days 13 14 15 13
Total Fixed Assets 6,409.0 6,714.0 6,713.0 6,713.0 Creditor days 69 64 64 70
Goodwill on Consolidation 17316 17316 17316 17316 Return Ratios (% )
Net Intangible Assets 27,925.0 27,905.0 27,905.0 27,905.0 RoE 17.1 18.1 20.3 22.0
Other Investments 312.0 612.0 712.0 812.0 RoCE 18.9 20.2 22.8 25.1
Inventory 3,383.0 3,890.0 4,750.7 4,297.0
Debtors 1,648.0 1,932.0 2,375.3 2,234.4 Valuation Ratios (x )
Loans and Advances 0.0 0.0 0.0 0.0 P/E 73.3 66.2 58.5 53.4
Investments & Other CA 1,605.0 1,697.0 1,583.6 1,718.8 EV / EBITDA 51.1 46.4 41.7 37.5
Cash 4,321.0 3,618.0 3,723.8 6,424.7 EV / Net Sales 12.8 11.5 10.0 9.2
Total Current Assets 13,640.0 14,647.0 16,233.9 18,800.1 Market Cap / Sales 12.9 11.6 10.1 9.3
Creditors 8,627.0 8,864.0 10,134.8 12,031.6 Price to Book Value 12.3 12.0 11.8 11.7
Provisions & other CL 2,214.0 2,080.0 2,058.6 2,234.4 Solvency Ratios
Total Current Liabilities 10,841.0 10,944.0 12,193.4 14,266.1 Debt/EBITDA 0.0 0.0 0.0 0.0
Net Current Assets 2,799.0 3,703.0 4,040.5 4,534.0 Debt / Equity 0.0 0.0 0.0 0.0
Others Non-Current Assets 1,133.0 1,261.0 1,286.0 1,311.0 Current Ratio 0.9 1.0 1.0 0.9
Application of Funds 57,275.0 58,793.0 57,972.5 58,591.0 Quick Ratio 0.5 0.7 0.6 0.6
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

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Exhibit 24: ICICI Direct coverage universe (FMCG)

CMP TP M Cap EPS (|) P/E (x) Price/Sales (x) RoCE (% ) RoE (% )
(|) (|) Rating (| Cr) FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E
Colgate (COLPAL) 1,583 1,610 Hold 43,606 39.6 38.6 42.3 39.9 41.0 37.4 8.6 8.2 7.5 77.8 82.6 92.7 62.2 62.9 70.8
Dabur India (DABIND) 549 700 Buy 97,076 9.9 10.9 12.7 55.7 50.5 43.3 8.9 8.2 7.2 24.9 24.6 26.5 20.8 21.4 22.6
Hindustan Unilever (HINLEV) 2,483 2,800 Hold 5,83,415 37.5 42.4 46.5 66.2 58.5 53.4 11.6 10.1 9.3 20.2 22.8 25.1 18.1 20.3 22.0
ITC Limited (ITC) 341 405 Buy 4,29,858 12.4 14.2 16.7 27.5 23.9 20.5 7.3 6.1 5.7 31.4 35.3 38.8 24.5 27.1 29.7
Jyothy Lab (JYOLAB) 192 205 Hold 7,076 4.3 6.2 7.8 45.1 30.7 24.7 3.3 2.9 2.6 18.7 26.2 31.3 16.6 23.0 26.8
Marico (MARLIM) 486 560 Hold 69,587 9.7 10.2 11.2 50.0 47.6 43.2 7.3 7.1 6.5 41.2 43.6 46.7 37.5 38.3 41.0
Nestle (NESIND) 19,925 22,400 Hold 1,90,912 222.4 255.8 301.1 89.6 77.9 66.2 13.0 11.4 10.3 58.7 57.1 63.0 111.3 103.6 110.3
Patanjali Foods (RUCSOY) 1,228 1,750 Buy 50,721 27.3 30.9 43.5 45.0 39.7 28.3 2.1 1.7 1.5 13.2 15.6 17.3 13.1 11.3 14.2
Tata Consumer Products (TATGLO)776 950 Buy 70,169 11.0 13.9 17.1 70.4 55.7 45.3 5.6 5.1 4.6 8.4 9.2 10.8 7.0 8.2 9.7
Varun Beverage (VARBEV) 1,144 1,235 Hold 71,889 17.2 23.2 26.8 66.4 49.2 42.7 8.1 5.6 5.0 17.1 30.3 33.5 18.3 29.0 29.4
VST Industries (VSTIND) 3,541 3,725 Hold 5,615 207.4 228.7 248.3 17.1 15.5 14.3 4.8 4.4 4.0 39.2 43.7 49.9 30.0 33.3 37.5
Zydus Wellness (ZYDWEL) 1,558 2,100 Buy 10,308 48.5 56.5 70.3 32.1 27.6 22.2 5.1 4.5 4.1 6.1 7.0 8.3 6.4 7.2 8.6
Source: Bloomberg, ICICI Direct Research

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RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according -to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock

Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]

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ANALYST CERTIFICATION
I/We, Sanjay Manyal MBA (FINANCE) Research Analyst, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s)

or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this

report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products.

ICICI Securities is Sebi registered stock broker, merchant banker, investment adviser, portfolio manager and Research Analyst. ICICI Securities is registered with Insurance Regulatory Development Authority of India Limited (IRDAI)

as a composite corporate agent and with PFRDA as a Point of Presence. ICICI Securities Limited Research Analyst SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock

broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture

capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship

with a significant percentage of companies covered by our Investment Research Department. ICICI Securities and its analysts, persons reporting to analysts and their relatives are generally prohibited from maintaining a financial

interest in the securities or derivatives of any companies that the analysts cover.

Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing on a company's fundamentals and, as

such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or

may not match or may be contrary with the views, estimates, rating, and target price of the Institutional Research.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected

recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would

endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI

Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in

circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein

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and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who

must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any

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the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-

managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past

twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other

benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of

interest at the time of publication of this report.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication

of the research report.

Since associates of ICICI Securities and ICICI Securities as a entity are engaged in various financial service businesses, they might have financial interests or actual/ beneficial ownership of one percent or more or other material

conflict of interest various companies including the subject company/companies mentioned in this report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or

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