Hassan Private Label

Question 1: How would you describe HPL and its position within the private label personal care industry?
HPL is a major player in private label personal care industry. Private labels hold around 19% (around $4 billion) of personal care industry (around $21.6 billion). HPL holds approximately 28% share of this private label personal care market. Even though HPL is a small player in overall private label market with the revenues of approximately $700 million compared to overall private label market of $70 billion HPL is a major player in private label personal care industry.
Question 2: Using assumptions made by Executive VP of Manufacturing, Robert Gates (Exhibit 5 and table on page 3), estimate the project’s FCFs. Are Gates’ projections realistic? If not, what changes would you consider making? FREE CASH FLOW CALCULATION | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | | | | | | | | | | | | | | | | Sales | | | | | 84,960 | 93,881 | 103,124 | 112,700 | 122,618 | 132,887 | 135,545 | 138,256 | 141,021 | 143,841 | COGS | | | | | 24,811 | 26,589 | 29,389 | 31,998 | 34,753 | 37,662 | 38,945 | 40,271 | 41,642 | 43,061 | Gross Profit | | | | 60,149 | 67,291 | 73,735 | 80,703 | 87,865 | 95,225 | 96,600 | 97,985 | 99,379 | 100,781 | SG&A | | | | | 6,594 | 7,286 | 8,004 | 8,747 | 9,517 | 10,314 | 10,520 | 10,730 | 10,945 | 11,164 | R&D | | | | | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | Depreciation | | | | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | EBIT | | | | | 49,555 | 56,005 | 61,732 | 67,956 | 74,348 | 80,911 | 82,080 | 83,255 | 84,434 | 85,617 | Income Tax @ | 40% | | | 19,822 | 22,402 | 24,693 | 27,182 | 29,739 | 32,365 | 32,832 | 33,302 | 33,773 | 34,247 | Unlevered Net Income | | | 29,733 | 33,603 | 37,039 | 40,773 | 44,609