Unilever (UL) Expands Further Into India

Unilever (UL), one of the world's largest consumer products companies, recently expanded its reach further into emerging markets by increasing its stake in India-based Hindustan Unilever from 52.48% to 67.26%. The company, which owns Dove, Hellmann's, Vaseline, Lipton, Axe and Ben & Jerry's, has held up remarkably well over the past year despite being based in recession-stricken England. Shares of Unilever have risen 26% over the past 12 months on the strength of its core brands.

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The increase of Unilever's stake in Hindustan Unilever is interesting because it keeps its ownership stake under 75%, a key threshold in Mumbai which requires an offer for the entire company if exceeded. Therefore, Unilever doesn't want to make a full takeover, as Hindustan Unilever is still identified as an "Indian company" which could be a useful perception when dealing with local marketing and public relations. In contrast to its expansion in India, Unilever notably reduced its North American exposure recently, exiting the U.S. frozen foods business and selling Skippy peanut butter to Hormel (HRL). The company is also currently shopping around its Wish-Bone salad dressing brand to B&G Foods (BGS) and Pinnacle Foods, both of which have expressed interest in acquiring the brand. This reduced the company's dependence on saturated, low-growth markets, and it shifted its attention towards higher-growth ones, where personal care products such as soap and shaving products were more popular. This shift fits Unilever's long-term plan to boost annual global sales to 80 billion euros ($104.3 billion), a whopping 56% gain over its prior year revenue. Unilever now generates 56% of its global revenue from emerging markets including India. This investment is dependent on long-term macro trends, such as the growth of the global population, which is expected to increase by a third between 2013 and 2050. As these emerging markets get increasingly wealthy, evolving into developed ones, their purchasing power will increase. As a result, basic consumer staples, such as the ones Unilever produces, will be in constant, high demand. Over 80% of this demand is forecast to come from Asia, specifically from richer urban areas. In these markets, Unilever primarily competes against Colgate-Palmolive (CL) and Procter & Gamble (PG), which all have similarly diversified product portfolios across multiple emerging markets. As a result of Unilever's newly realigned business model, Goldman Sachs upgraded the stock to a "conviction buy," and analysts at Questor also upgraded the stock to "buy." Last quarter, Unilever's revenue rose 9.5% as earnings increased 14%. The stock currently trades at 18.4 times forward earnings, with a robust profit margin of 8.73%. It also pays a quarterly dividend of $0.35 per share, a 3% yield at current prices. Other News About UL Unilever Lifts Hindustan Unilever Stake to 67.26% Unilever increases its exposure to India. Unilever Targets Emerging Markets Unilever looks for growth in the usual places. Other Stocks in the News Staying Relevant in a Smartphone Dominated World Can GPS manufacturer Garmin stay relevant? Amazon's Smartphone Could Be Smarter Than You Think What will Amazon's upcoming smartphone look like? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Jul 18, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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