NAME MIHIR BHATT

COURSE TYBBI
ROLL NO. 004

TOPIC:
Analyze two company's financial statements and interpret peer & company
ratios (Balance sheet, Profit & loss, combined)

ITC vs HUL: Detailed business comparison and Which is a better pick to invest in?

The Fastmoving Consumer Goods (FMCG) market is the fourth largest contributor to the Indian
economy. According to this report, the Indian FMCG market size was US $110 Billion in 2020
which is expected to reach the value of US $615.87 Billion by 2027, with a CAGR of 27.9% for
the period. On a broader scale, they contain everything you can see on the shelves of a store –
Biscuits, Chips, Packaged Food Items, Soaps, Healthcare and Homecare products. However, out
of all, household and personal care products generate 50% of overall FMCG sales. There are
many FMCG businesses in India, however, if we talk about the market leaders, companies like
HUL, ITC, Tata, Dabur, etc. come to the top.
This article compares two leading FMCG companies, ITC vs HUL. Starting from a brief
description of HUL vs ITC stock and marketing strategy of HUL and ITC, the article
comprehensively covers the comparison between HUL and ITC based on the stats and
performance. So, with no further delay, let us begin with this ITC vs HUL study.

HUL vs ITC Stock: Quick Overview

As of April 26, 2023, HUL stock is six times more expensive than ITC – with HUL closing at Rs.
2510.80 on April 26, while ITC reaching its 52-week high of Rs. 413. One major reason is the
demand revival in the FMCG sector after Covid, because of which the BSE FMCG index has
also spiked this year with a Year-to-Date return of 6.06% and over 22% yearly return. If we look
at the returns of individual stocks, HUL peaked at around 17.4% in a year while ITC gave an
unexpected return of around 60% in the previous year. However, HUL leads in terms of 5Y
returns, as HUL gave almost 72% while ITC just managed to touch 50% in the past 5 years.
So, according to experts, both the FMCG stocks look promising in the coming year and can see
an uptrend with timely yet small drawdowns. However, a few experts like Motilal Oswal and
Edelweiss Securities are more bullish on ITC in comparison between HUL and ITC, due to an
increment in the cigarette demand and increased hotel demands post-Covid.

Marketing Strategy of HUL and ITC

If we talk about the marketing strategy of HUL and ITC, both brands have taken advanced steps
to promote their products. One of the recent ‘Bin Boy’ advertisements by HUL was the talk of
the time and expressed a message of Sustainability & Waste management.
ITC has also been seen promoting environmentally friendly and thoughtful ads in the past.
Therefore, if we see both brands keep promoting their products sustainably and interestingly.
ITC and HUL employ robust marketing strategies that contribute to their significant market share
in the Indian FMCG sector. While they compete head-on in some areas, they also differentiate
themselves with unique approaches that cater to different segments of the vast Indian market.

ITC vs HUL: Company Overview

ITC
Established in 1910 as ‘Imperial Tobacco Company of India Limited’, ITC was renamed to ‘Indian Tobacco
Company Limited’ in the 1970s. If we look at it, ITC is one of the oldest companies in India with a
presence of more than 110 years in the market. The company is a well-known name in the FMCG,
Hotels, Paper, Packaging and Personal care sectors. Apart from these, the company also holds an
unmatchable grip in the cigarette market of India, with 8 out of every 10 cigarettes sold legally from an
ITC brand, making it the biggest and the most renowned tobacco company of India. Some of the famous
products of ITC include Gold Flake cigarettes, Sunfeast biscuits, Classmate notebooks, and Bingo Chips.

Talking of its FMCG product line-up, the top 10 ITC products are:

1. Aashirvaad Atta
2. Sunfeast Biscuits
3. ITC Hotels
4. Bingo Chips
5. Yippee Noodles
6. Candyman Chocolates
7. Sunbean Coffee
8. B Natural Juice
9. Classmate Notebooks
10. Fiama Soaps
BASIC INFORMATION
Managing Director: Sanjiv Puri
NSE Symbol: ITC
CMP: ₹ 412.25
No. of Shares: 1242.80 Cr
Market Cap: ₹ 5,12,345.03 Cr

HUL
Hindustan Unilever Limited (HUL) is an Indian subsidiary of Unilever, a British-based
consumer goods conglomerate that has been operational in India since 1933. HUL has a well-
diversified portfolio with products ranging from categories such as foods, beverages, personal
care products, and cleaning agents. Some of its famous products are Lux, Lifebuoy, Surf Excel,
Vaseline, Dove, Pepsodent, Brooke Bond, Horlicks, and Kwality Wall’s. The company has 90+
years of history in the Indian market with more than 50 brands under its portfolio.
As HUL is a collaboration between Unilever Plc. (Parent Company) and Hindustan Vanaspati
Manufacturing Co., Hindustan pays a royalty to Unilever for using their brand and technology.
In a recent meeting, the board decided to increase the royalty from 2.65% in FY22 to 3.45% for
three years, i.e., from FY23 TO FY25. However, investors express disagreement with the
decision as it can create an impact of about 2-2.8% in the EPS (Earnings Per Share).
BASIC INFORMATION
Managing Director: Mr. Rohit Jawa
NSE Symbol: HINDUNILVR
CMP: ₹ 2510.80
No. of Shares: 234.96 Cr
Market Cap: ₹ 5,89,935.37 Cr

ITC FINANCIAL STATEMENT ANALYSIS

ITC INCOME STATEMENT 2022-23

No. of Months Year Ending 12 Mar-22* 12 Mar-23* % Change

Net Sales Rs m 561,312 653,555 16.4%
Other income Rs m 18,922 19,819 4.7%
Total Revenues Rs m 580,235 673,374 16.1%
Gross profit Rs m 206,406 258,200 25.1%
Depreciation Rs m 17,324 18,090 4.4%
Interest Rs m 600 778 29.6%
Profit before tax Rs m 207,405 259,151 24.9%
Tax Rs m 52,373 64,384 22.9%
Profit after tax Rs m 155,031 194,767 25.6%
Gross profit margin % 36.8 39.5
Effective tax rate % 25.3 24.8
Net profit margin % 27.6 29.8

ITC Income Statement Analysis

 Operating income during the year rose 16.4% on a year-on-year (YoY) basis.

 The company's operating profit increased by 25.1% YoY during the fiscal.
Operating profit margins witnessed a fall and down at 39.5% in FY23 as against
36.8% in FY22.

 Depreciation charges increased by 4.4% and finance costs increased by 29.6%

YoY, respectively.

 Other income grew by 4.7% YoY.

 Net profit for the year grew by 25.6% YoY.

 Net profit margins during the year grew from 27.6% in FY22 to 29.8% in FY23.

ITC Balance Sheet as on March 2023

No. of Months Year Ending 12 Mar-22* 12 Mar-23* % Change
Net worth Rs m 611,392 684,138 11.9

Current Liabilities Rs m 121,637 137,394 13.0

Long-term Debt Rs m 49 35 -28.0
Total Liabilities Rs m 771,960 858,310 11.2

Current assets Rs m 342,325 396,709 15.9

Fixed Assets Rs m 429,636 461,601 7.4
Total Assets Rs m 771,960 858,310 11.2

ITC Balance Sheet Analysis

 The company's current liabilities during FY23 stood at Rs 137 billion as compared
to Rs 122 billion in FY22, thereby witnessing an increase of 13.0%.

 Long-term debt down at Rs 35 million as compared to Rs 49 million during FY22,

a fall of 28.0%.

 Current assets rose 16% and stood at Rs 397 billion, while fixed assets rose 7%
and stood at Rs 462 billion in FY23.

 Overall, the total assets and liabilities for FY23 stood at Rs 858 billion as against
Rs 772 billion during FY22, thereby witnessing a growth of 11%.

ITC Cash Flow Statement 2022-23

No. of months 12 12
Particulars % Change
Year Ending Mar-22 Mar-23
Cash Flow from Operating Activities Rs m 157,755 188,776 19.7%
Cash Flow from Investing Activities Rs m -22,385 -57,323 -
Cash Flow from Financing Activities Rs m -135,805 -130,060 -

Net Cash Flow Rs m -435 1,392

ITC Cash Flow Statement Analysis

  ITC's cash flow from operating activities (CFO) during FY23 stood at Rs 189
billion, an improvement of 19.7% on a YoY basis.

 Cash flow from investing activities (CFI) during FY23 stood at Rs -57 billion, an
improvement of 156.1% on a YoY basis.

 Cash flow from financial activities (CFF) during FY23 stood at Rs -130 billion, an
improvement of 4% on a YoY basis.

 Overall, net cash flows for the company during FY23 stood at Rs 1 billion from
the Rs -435 million net cash flows seen during FY22.

HUL FINANCIAL STATEMENT ANALYSIS

HUL Income Statement 2022-23

No. of Months Year Ending 12 Mar-22* 12 Mar-23* % Change
Net Sales Rs m 524,460 605,800 15.5%
Other income Rs m 2,580 5,120 98.4%
Total Revenues Rs m 527,040 610,920 15.9%
Gross profit Rs m 128,130 140,850 9.9%
Depreciation Rs m 10,910 11,380 4.3%
Interest Rs m 1,060 1,140 7.5%
Profit before tax Rs m 118,740 133,450 12.4%
Tax Rs m 29,870 32,010 7.2%
Profit after tax Rs m 88,870 101,440 14.1%
Gross profit margin % 24.4 23.3
Effective tax rate % 25.2 24.0
Net profit margin % 16.9 16.7

HUL Income Statement Analysis

 Operating income during the year rose 15.5% on a year-on-year (YoY) basis.
  The company's operating profit increased by 9.9% YoY during the fiscal.
Operating profit margins witnessed a fall and stood at 23.3% in FY23 as against
24.4% in FY22.

 Depreciation charges increased by 4.3% and finance costs increased by 7.5%

YoY, respectively.

 Other income grew by 98.4% YoY.

 Net profit for the year grew by 14.1% YoY.

 Net profit margins during the year declined from 16.9% in FY22 to 16.7% in
FY23.

HUL Balance Sheet as on March 2023

No. of Months Year Ending 12 Mar-22* 12 Mar-23* % Change
Net worth Rs m 490,610 503,040 2.5

Current Liabilities Rs m 112,800 120,280 6.6

Long-term Debt Rs m 0 0 0.0
Total Liabilities Rs m 705,060 730,770 3.6

Current assets Rs m 155,090 169,860 9.5

Fixed Assets Rs m 549,840 560,790 2.0
Total Assets Rs m 705,060 730,770 3.6

HUL Balance Sheet Analysis

 The company's current liabilities during FY23 stood at Rs 120 billion as compared
to Rs 113 billion in FY22, thereby witnessing an increase of 6.6%.

 Current assets rose 10% and stood at Rs 170 billion, while fixed assets rose 2%
and stood at Rs 561 billion in FY23.
  Overall, the total assets and liabilities for FY23 stood at Rs 731 billion as against
Rs 705 billion during FY22, thereby witnessing a growth of 4

HUL Cash Flow Statement 2022-23

No. of months 12 12
Particulars % Change
Year Ending Mar-22 Mar-23
Cash Flow from Operating Activities Rs m 90,480 99,910 10.4%
Cash Flow from Investing Activities Rs m -17,280 -14,940 -
Cash Flow from Financing Activities Rs m -80,150 -89,530 -
Net Cash Flow Rs m -6,950 -4,460 -

HUL Cash Flow Statement Analysis

 HUL's cash flow from operating activities (CFO) during FY23 stood at Rs 100
billion, an improvement of 10.4% on a YoY basis.

 Cash flow from investing activities (CFI) during FY23 stood at Rs -15 billion on a
YoY basis.

 Cash flow from financial activities (CFF) during FY23 stood at Rs -90 billion on a
YoY basis.

 Overall, net cash flows for the company during FY23 stood at Rs -4 billion from
the Rs -7 billion net cash flows seen during FY22.

ITC vs HUL: Detailed Comparison

We will look at the comparison between ITC and HUL based on the following metrics:

Revenue
Revenue is the money obtained by carrying out business operations. In simple terms, it equals the
product of no. of items sold and the average sales price of each item.
*All values are in Cr
2018 2019 2020 2021 2022
ITC 40,254.67 44,432.67 45,136.08 45,111.81 59,745.56
 Revenue Growth in 0.41% 10.37% 1.58% -0.05% 32.43%
%
HUL 33,926.00 37,660.00 38,273.00 45,311.00 50,336.00
Revenue Growth in 8.39% 11.00% 1.62% 18.38% 11.09%
%
On comparing the values of revenue, ITC has managed to give a CAGR of 8.95% over the 5
years versus the 10.1% CAGR of HUL. HUL has been more consistent in terms of YoY growth
in revenue.

Profit
Profit is the money left with the company after paying for business expenses and taxes.
*All values are in Cr
2018 2019 2020 2021 2022
ITC 11,223.2 12,464.3 15,136.0 12,934.4 15,057.8
5 2 5 9 3
Profit Growth in 10.02% 11.05% 21.43% -14.54% 16.41%
%
HUL 5237.00 6036.00 6738.00 7954.00 8818.00
Profit Growth in 16.63% 15.25% 11.63% 18.04% 10.86%
%
Talking of Year-on-Year growth in Profit, HUL is the winner as it gives a CAGR of around
14.5% for the 5 years against the CAGR of 8.87% of ITC.

P/E Ratio
P/E (price-to-earning) ratio is the ratio of the share price of a company to its earnings per share. It
is a great metric to determine a company’s performance.

Industry P/E: Industry P/E is the average P/E ratio of all the stocks present in the sector. If a
company has a P/E ratio less than the industry P/E, it means the company is undervalued and vice
versa.
P/E Ratio Industry P/E
ITC 30.13 33.57
HUL 60.59 60.92
We can see that ITC has a lower PE, however, in comparison with the sector, it is properly
valued. On the other hand, HUL has comparatively higher PE than ITC.

P/B Ratio
P/B (price-to-book) ratio is the ratio of the price of the share to its book value. Book value
commonly refers to the money that the shareholders will earn if the company has cleared all its
liabilities or liquidated. A P/B ratio under 1 is considered good, however, it is subject to industry
and business.
P/B Ratio Book Value
ITC 7.96 Rs. 51.81
HUL 11.42 Rs. 219.88
We can see that ITC has a lower value in P/B ratio, making it more investment friendly.
However, in terms of Book Value, HUL leads by a significant margin.

EPS (Earning per Share)

It is obtained by dividing the net profit of the company by the total number of outstanding shares.
It tells how much money a company can make from each share.
2018 2019 2020 2021 2022
ITC Rs. 9.26 Rs. 10.30 Rs. 12.47 Rs. 10.70 Rs. 12.37
HUL Rs. 24.09 Rs. 27.97 Rs. 31.17 Rs. 34.03 Rs. 37.39
HUL has significantly more EPS than ITC. However, its pricing is one of the main factors here.

ROE & ROCE

ROE (Return on Equity) is the ratio of the net income of a company to its shareholder’s equity. It
is a great parameter to judge a company’s performance. The higher the ROE, the better a
company is at converting its equity into profits.
ROCE (Return on Capital Employed) is the measure of how a company is utilizing its capital
(debt and equity both). The higher the %, the better it is.
ROE ROCE
ITC 25.66% 33.04%
HUL 18.33% 24.61%
So, we can see that ITC leads in terms of ROE & ROCE.
Div. Yield
Dividend Yield % is the amount of money distributed among shareholders divided by the current
stock price. A higher dividend yield can lead to extra passive income from the stock.

ITC HUL
Div. Yield Percentage 3.44% 1.37%
ITC has been consistent in giving dividends to its shareholders and has given an average of
3.44% dividend yield against only 1.37% of HUL.
CONCLUSION

While the article is titled ITC vs HUL, the main message was to provide a detailed analysis of
these two FMCG giants to help you make a better decision. Both stocks have given impressive
returns in recent years and are market leaders in the FMCG segment. The analysts are expecting
the stocks to follow the pattern in the coming time as well. However, it would be interesting to
see the impact of FDI (Foreign Direct Investment) policies by the government, the involvement
of the rural population as well as the role of the robust e-commerce infrastructure.