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, as a result 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. Similarly, ITC has also been seen promoting environment-friendly and thoughtful ads in the past. Therefore, if we see both brands keep promoting their products sustainably and interestingly.
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 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 | 11,223.25 | 12,464.32 | 15,136.05 | 12,934.49 | 15,057.83 |
| 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 high 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 of 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. 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.
Final Words
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.
