52-week BLOCKBUSTER: Hindustan Unilever

Breaking out of a prolonged period of muted returns, the stock of Hindustan Unilever turned out to be a top performers in the Nifty basket this year. The 31 per cent gain on the stock this year is explained by many factors.

One, even as much of India Inc has seen its sales and profit growth numbers deteriorate over the past three quarters, Hindustan Unilever's numbers have been on an improving trajectory. From flat profits in the March quarter of 2011, the company delivered an impressive 22 per cent growth in the latest September quarter. These profits have been achieved through a combination of calibrated price increases in some categories where it wields pricing power and cuts in costs and advertising spends in others.

Two, the company has managed a successful shift in its product mix in favour of high margin categories such as skin care and foods, benefiting from uptrading by affluent consumers. The stock market has taken note of these changes. If the company's profit growth has driven earnings, the market has pegged up the valuation accorded to the stock. From about 28 times at the beginning of the year, HUL's stock closed the year with a PE of 35 times, a reflection of investor confidence that good performance will be sustained.

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