HUL Results Analysis

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HUL Results Analysis Powered By Docstoc
					SECOND ASSIGNMENT
OF

BEHAVIORAL FINANCE

UNDER GUIDANCE OF PROF. S.N.RAO

(SJM SCHOOL OF MANAGEMENT, IIT BOMBAY)

PREPARED BY KUMAR DHANANJAY RAKESH ROLL NO: 917

Contents to be covered

 

Introduction Regarding Fourth Quarter Result of HUL Computation of daily abnormal returns for HUL during -10 days to +10 days relative to the announcement of 4th quarter earnings Plotting the result and interpretation of the result with reference to semi-strong form of efficient market





Significant notes to the earnings announcements of Fourth Quarter – Expected impact on the stock price
Computation of Abnormal and Cumulative Abnormal Returns (CARs) Graph of the Above Results Interpretation of The Results

  

Introduction Regarding DQ2008 Result of HUL

     

Name of the company- HUL Earnings Announcement Date- 25 January 2009 PAT- 211,797 (Rs. Lakhs)

Growth in PAT compared to the same quarter last year- 13.82%
PAT as % of previous year’s PAT- 113.82% Other income as % of total income- 1.89%

Computation of Daily Abnormal Returns for HUL Relative to The Announcement of 4th Quarter Earnings
Hindustan Unileaver Fourth Quarter Result(31st Dec 2008) and Its Impact on Stock Price HUL Close Price HUL (%) log return S&P CNX NIFTY Return (%)S&P CNX NIFTY log Return 262.65 3407.29 254.95 -2.98% 3372.7 -1.02% 254.05 -0.35% 3483.84 3.24% 247.1 -2.77% 3362.74 -3.54% 250.8 1.49% 3475.45 3.30% 253.4 1.03% 3497.27 0.63% 246.2 -2.88% 3436.31 -1.76% 254.55 3.34% 3325.17 -3.29% 253.35 -0.47% 3334.55 0.28% 246.9 -2.58% 3291.24 -1.31% 253.1 2.48% 3405.28 3.41% 259 2.30% 3502.03 2.80% 256.55 -0.95% 3474.27 -0.80% 261.2 1.80% 3538.57 1.83% 261.65 0.17% 3405.45 -3.83% 264.45 1.06% 3426.68 0.62% 267.75 1.24% 3450.6 0.70% 263.6 -1.56% 3422.28 -0.82% 260.9 -1.03% 3499.89 2.24% 260.2 -0.27% 3594.44 2.67% SUM

Date 12-Jan-09 13-Jan-09 14-Jan-09 15-Jan-09 16-Jan-09 19-Jan-09 20-Jan-09 21-Jan-09 22-Jan-09 23-Jan-09 27-Jan-09 28-Jan-09 29-Jan-09 30-Jan-09 2-Feb-09 3-Feb-09 4-Feb-09 5-Feb-09 6-Feb-09 9-Feb-09

AR -1.96% -3.60% 0.76% -1.81% 0.41% -1.12% 6.62% -0.75% -1.27% -0.93% -0.50% -0.15% -0.04% 4.01% 0.44% 0.54% -0.74% -3.27% -2.93% -6.28%

CAR -1.96% -5.55% -4.79% -6.60% -6.19% -7.32% -0.69% -1.45% -2.72% -3.64% -4.14% -4.30% -4.33% -0.33% 0.12% 0.66% -0.08% -3.35% -6.28% -12.57%

250 270

245

265

260

240 255

235 12-Jan-09 13-Jan-09 14-Jan-09 15-Jan-09 16-Jan-09 17-Jan-09 18-Jan-09 19-Jan-09 20-Jan-09 21-Jan-09 22-Jan-09 23-Jan-09 24-Jan-09 25-Jan-09 26-Jan-09 27-Jan-09 28-Jan-09 29-Jan-09 30-Jan-09 31-Jan-09 1-Feb-09 2-Feb-09 3-Feb-09 4-Feb-09 5-Feb-09 6-Feb-09 7-Feb-09 8-Feb-09 9-Feb-09

HUL Close Price

Plotting The Result and Interpretation of The Result With Reference To Semi-Strong Form of Efficient Market

HUL Close Price

Significant Notes to The Earnings Announcements of Fourth Quarter
   

Net sales grows 16.8% FMCG business grows by 21.2%, HPC +20.8%, Foods +23.5% Underlying volume growth of 2.3%; strong volume growth in Personal Products and Foods, offset by slowdown in Soaps & Detergents A&P spends was marginally lower than last year by -1.3% PBIT grows 15.1%

  

PBIT margin 20 bps lower at 16.8%; high input cost inflation, though receding, impacted margins. PAT from ordinary activities before exceptional grows by 12.7%
Net Profit declines by -2.5%, on account of exceptional gains on property sale in DQ’07



Computation of Abnormal and Cumulative Abnormal Returns (CARs)
Hindustan Unileaver Fourth Quarter Result(31st Dec 2008) HUL (%) log return (%)S&P CNX NIFTY log Return AR -2.98% -0.35% -2.77% 1.49% 1.03% -2.88% 3.34% -0.47% -2.58% 2.48% 2.30% -0.95% 1.80% 0.17% 1.06% 1.24% -1.56% -1.03% -0.27% -1.02% 3.24% -3.54% 3.30% 0.63% -1.76% -3.29% 0.28% -1.31% 3.41% 2.80% -0.80% 1.83% -3.83% 0.62% 0.70% -0.82% 2.24% 2.67% SUM -1.96% -3.60% 0.76% -1.81% 0.41% -1.12% 6.62% -0.75% -1.27% -0.93% -0.50% -0.15% -0.04% 4.01% 0.44% 0.54% -0.74% -3.27% -2.93% -6.28%

Date 12-Jan-09 13-Jan-09 14-Jan-09 15-Jan-09 16-Jan-09 19-Jan-09 20-Jan-09 21-Jan-09 22-Jan-09 23-Jan-09 27-Jan-09 28-Jan-09 29-Jan-09 30-Jan-09 2-Feb-09 3-Feb-09 4-Feb-09 5-Feb-09 6-Feb-09 9-Feb-09

CAR -1.96% -5.55% -4.79% -6.60% -6.19% -7.32% -0.69% -1.45% -2.72% -3.64% -4.14% -4.30% -4.33% -0.33% 0.12% 0.66% -0.08% -3.35% -6.28% -12.57%

0.04

0.06

-0.02 0.08

-0.04

-0.06

0.02

-0.08

Graph of The Abnormal and Cumulative Abnormal Returns (CARs)

-0.1 0 HUL AR 12-Jan-09 13-Jan-09 14-Jan-09 15-Jan-09 16-Jan-09 17-Jan-09 18-Jan-09 19-Jan-09 20-Jan-09 21-Jan-09 22-Jan-09 23-Jan-09 24-Jan-09 25-Jan-09 26-Jan-09 27-Jan-09 28-Jan-09 29-Jan-09 30-Jan-09 31-Jan-09 1-Feb-09 2-Feb-09 3-Feb-09 4-Feb-09 5-Feb-09 6-Feb-09 7-Feb-09 8-Feb-09 9-Feb-09 HUL CAR

Comparison chart of Quarterly Financial Results

Comparison Chart of Quarterly Financial Results Quarter Ended Net Sales/Income from Operations Depreciation Total Expenditure Including Other Expenditures Profit (+)/ Loss (-) from Ordinary Activities before tax Tax expense Net Profit (+)/Loss(-) for the period 31-Dec-08 430771 4057 30-Sep-08 402787 3927 30-Jun-08 421567 3792 31-Mar-08 31-Dec-07 379394 3630 368740 3688

365522

372088

372453

367756

361012

72231 9007 61574

66971 12310 54661

68756 12938 55818

47143 9048 38095

68444 13045 63144

Graphical Representation of the Quarterly Results

450000 400000

350000
300000 250000 200000 150000 100000 50000 0

Comparison Chart of Quarterly Financial Results 31-Dec-08

Comparison Chart of Quarterly Financial Results 30-Sep-08

Comparison Chart of Quarterly Financial Results 30-Jun-08

Comparison Chart of Quarterly Financial Results 31-Mar-08

Comparison Chart of Quarterly Financial Results 31-Dec-07

Interpretation of the Result

The semi strong form of the efficient market hypothesis assumes that security prices adjust rapidly to all publicly available information. Such information includes market based information and thus the semi strong EMH encompasses the weak form EMH (if markets are semi strong efficient, they are also weak form efficient.)  In addition to market information, other public information includes earnings and dividend announcements, financial ratios, accounting practices, stock splits, and economic and political news. If markets are semi strong efficient, investors should not be able to earn excess risk-adjusted returns if their decisions are based on information that has already been made public. Neither technical analysis nor fundamental analysis would provide a predictable edge.  There are two types of studies frequently used to test the semi strong form of the EMH: 1. Return prediction studies attempt to predict the future rates of returns for the market or individual stocks using public information such as valuation, dividend yield, or risk premium. Another type of return prediction study is event studies, which examine abnormal returns immediately following a major announcement to determine whether returns predictably persist or reverse. 2. Cross-sectional return prediction studies test whether variables such as valuation to predict the relative returns of all stocks in a sample.


In this case Since the stock price of the company has gone up after declaration of the financial result of fourth quarter, that means stock price of HUL is reflecting the publically available information and hence, the market is in semi strong form.

Thank You


				
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Description: Behavioral Finance...HUL Analysis- II