Groups have to identify 3 companies which they like to buy and prepare an investment thesis for the

same in MS word format. Please be brief and limit yourself to 1-2 pages per company. The
investment thesis should contain a brief qualitative reasoning (industry/company/future potential
etc) along with a fair value estimate. You might use Bloomberg consensus estimates for your work
and any valuation tool of your choice.

HUL

Axis Bank

Shree Cement
HUL

Qualitative Analysis

The global FMCG sector is worth nearly the GDP of Japan and Germany combined.

Fast moving consumer goods (FMCG) are the 4th largest sector in the Indian economy. There are three
main segments in the sector – food and beverages which accounts for 19 per cent of the sector,
healthcare which accounts for 31 per cent and household and personal care which accounts for the
remaining 50 per cent.

Accounting for a revenue share of around 45 per cent, rural segment is a large contributor to the
overall revenue generated by the FMCG sector in India. Demand for quality goods and services have
been going up in rural areas of India, on the back of improved distribution channels of manufacturing
and FMCG companies. Urban segment accounted for a revenue share of 55 per cent in the overall
revenues recorded by FMCG sector in India.

FMCG Companies are looking to invest in energy efficient plants to benefit the society and lower costs
in the long term. Patanjali will spend US$ 743.72 million in various food parks in Maharashtra, Madhya
Pradesh, Assam, Andhra Pradesh and Uttar Pradesh. Dabur is planning to invest Rs 250-300 crore (US$
38.79-46.55 million) in FY19 for capacity expansion and is also looking for acquisitions in the domestic
market. Investment intentions, related to FMCG sector, arising from paper pulp, sugar, fermentation,
food processing, vegetable oils and vanaspathi, soaps, cosmetics and toiletries industries, worth Rs
165.52 billion (US$ 2.36 billion) were implemented between January–September 2018.

Growing awareness, easier access, and changing lifestyles are the key growth drivers for the consumer
market. The focus on agriculture, MSMEs, education, healthcare, infrastructure and employment
under the Union Budget 2018-19 is expected to directly impact the FMCG sector. These initiatives are
expected to increase the disposable income in the hands of the common people, especially in the rural
area, which will be beneficial for the sector.

The company has been doing positively with

 Net sales of INR 13,500 crores

 EBITDA of INR 4,000 crores and
 Market capitalization of INR 250,000 crores

HUL is the leader in the 6 F&R categories, has shown double digit growth across all categories and
clocked a segmental operating margin of 16.9%. With the acquisition of Horlicks business from GSK, it
is vying to be a more aggressive player in the healthy food market in India.

India has been a bright spot as a FMCG market with per capita consumption of $29. There is however
a lot of room to grow for HUL and other companies to grow in India as it still lags behind other
countries, like Indonesia, Chine and Philippines which have a per capita consumption of 2X, 4X and 5X
of India respectively.