After a prolonged lull, activity at the Hindustan Lever Ltd (HLL) counter picked up sharply last week with the scrip posting handsome gains. On the Bombay Stock Exchange, it closed at Rs 1,677.50, registering a gain of Rs 48.50 over the previous week's close. On the National Stock Exchange, the scrip closed up Rs 51.45 at Rs 1,680.35.
Among heavy-weight index stocks, HLL was the highest gainer. Foreign funds were reported to have been active buyers at the counter towards the end of the week.
The scrip remained firm even though domestic institutions were reported to be booking profits at the counter.
HLL, the largest fast-moving consumer goods company in India with a controlling market share in most of its product categories, accounts for a 17 per cent weight in the Sensex.
With the merger of Ponds India, the weightage is expected to increase further. HLL dominates the Indian fabric wash and personal care businesses. The merger of BBLIL has given it a strong presence in the Indian beverages and food business. Ponds India, with its stronghold in the personal care business, is expected to give an added advantage to HLL with its cash-rich status.
According to analysts, the high premium enjoyed by HLL is due to its business and management.
Its defensive business, strong brand franchises, unbeatable market share and wide distribution network enables it to enjoy a better price-earning ratio.
Currently the portfolio of HLL comprises 14 product groups with 8 groups considered defensive. The defensive business contributes to nearly 57 per cent of the company's turnover.
"HLL's ambitious target to double its profits in the next three years is mainly on the back of its thrust on the high-margin personal products business.
"Higher penetration in rural markets and innovative packaging enabled it to regain its market share which it had lost to P&G when the latter introduced the Pantene brand.
"We expect the personal product segment to grow at a compounded annual growth rate of 33 per cent during calendar years 1997-99," says Rajesh Kothari, analyst KJMC Research.
"To keep its market share increasing, HLL strongly believes in innovations. It has launched 26 new products in the personal care business in calendar year 1997 and 23 in calendar year 1996 compared with only 8 in calendar year 1995.
"The company plans to introduce two new products/variants every month.
"We expect HLL's revenues to grow at a compounded annual growth rate of 15.4 per cent during calendar year 1997-99," Kothari adds.
