Unilever is turning the logo on its debatable and lucrative Fair and Lovely leather whitening products into Glow and Lovely. Both names are greater to describe how their $73 billion Indian unit, Hindustan Unilever, is resisting a strict stagnation in the giant emerging market.
A slowing economy and a credit crunch were wreaked havoc on the industry long before the pandemic. Growth in sales of fast-moving client goods in India increased from 10% in 2018 to just 2% at the end of March, when the government first turned to end companies. And the resulting value discounts were one of the reasons why Hindustan Unilever’s $143 billion Anglo-Dutch mother underestimated the group’s purpose to improve its underlying operating margin last year.
However, Indian society turns out to be intelligent. Organic sales in the 3 months to June fell 7% less than expected year after year, thanks to a focus on health, nutrition and hygiene products such as Lifebuoy disinfectant and Surf Excel detergent. The newly acquired Horlicks brand, advertised as a hot drink that sells immunity, also helped EBITDA margins. This is the largest net source of revenue across 7% over the past year to $252 million. Overall, the company estimates that 80% of its business is gaining a market percentage compared to its competitors, adding Colgate-Palmolive and Nestlé.
Some of the winnings will be short-lived. Chief Sanjiv Mehta warned that the obsessive sanitizer call probably wouldn’t be the virus, for example. Possible additional disruptions to the company’s operations are also a major concern, as major cities re-impose stricter blockades. Worryingly, dozens of Unilever workers have tested positive for Covid-19 in a Haridwar unit in recent days. Meanwhile, the spread of the virus in non-urban areas, where two-thirds of the population live, will possibly also exceed India Inc.’s hopes for a rural economic recovery.
Despite this, investors seek safety in the largest and most productive capitalized names in the market to succeed in the turmoil of the pandemic. This would possibly explain why Hindustan Unilever’s shares have risen to a fifth this year, bringing their valuation to a maximum of five years. The Indian company is now valued at 61 times its expected profits, more than 3 times its parent company, Refinitiv said. Given the company’s commendable performance, that’s fair enough.
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