Hindustan Unilever (HUL) share price rose 4% in early trade to hit an intraday high of Rs 2,230 apiece on Thursday, a day after the company announced its March quarter earnings. The FMCG major reported a 5.34% increase in its consolidated net profit to Rs 2,307 crore for the fourth quarter. Moreover, HUL has now become a Rs 50,000 crore turnover company and also the first pure FMCG firm to achieve this milestone. HUL now has 16 brands with a turnover of Rs 1,000 crore each. HUL share price has plunged over 8% so far this year. However, brokerages remain bullish and see up to 17% potential rally going forward. “HUL is the best prepared among peers, both on the technology front as well as on the e-commerce strategy level, to deal with the potentially significant disruptions going forward,” said Motilal Oswal Financial Services in its report.
Motilal Oswal: Buy
Target price: Rs 2,500
Analysts at Motilal Oswal kept their EPS forecasts for FY23/FY24 broadly unchanged. HUVR’s pre-COVID earnings had been extremely strong and it reported 18% EPS compound annual rate in the four years ending FY20, before steeper commodity cost inflation and the over-indexed discretionary portfolio adversely impacted its earnings in FY21 and FY22. “The company’s pre-COVID earnings growth was particularly impressive given weak mid-single-digit growth posted by its (much smaller) staples peers over the same period. We expect HUVR to return to mid-teens earnings growth,” they said. The brokerage believes that HUL’s valuations at 47.7x FY24E EPS still leave room for further upside. “We maintain our buy rating on the stock with a target of Rs 2,500 (premised on 55x FY24 EPS) implying 17% upside,” it said.
Prabhudas Lilladher: Buy
Target price: Rs 2,384
Analysts at Prabhudas Liladher believe that near term margin headwinds are likely to sustain due to inflationary environment in commodity basket; down trading of products across categories; and rising gap between realisations vs commodity prices. “However, we remain positive on the longer term structural story given sustained market share gains; strong innovation pipeline; scale up in emerging categories; distribution gains from strategies like WIMI and SHIKHAR; and faster growth in premium portfolio. “Risk reward is favourable at 44x FY24 EPS and 2% dividend yield, but we expect returns to be back-ended given near term volume pressures and volatility in input costs. Retain buy,” said Prabhudas Liladher in a report.
Target price: Rs 2,456
HUL posted resilient numbers aided by a strong portfolio of brands across price points helping it to gain market share in key categories and across markets. “The company is focusing on premiumisation and market development to improve penetration in key categories and digitalisation to drive consistent earnings growth in the medium to long term. We maintain a buy recommendation on the stock with an unchanged price target of Rs 2,456,” the brokerage said in its report.
ICICI Securities: ADD
Target price: Rs 2,450
Analysts at ICICI Securities believe most of the concerns around the HUL stock (rural slowdown, inflation woes, D2C premiumisation challenges) are now in the price (60% underperformance vs the Nifty over March 2020-April 2022). According to the brokerage, HUL continues to deliver well on steady premiumisation and category development; enhance digital capabilities including e-commerce salience; D2C brands and improved reach (Shikhar) – digital demand capture has 20%+ salience. “As price-lever will have its limitation on guarding margins, the intent is to further drive cost efficiencies. Balance between cost rationalisation and investing for the future will be (again) key. Maintain ADD,” it said.
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