Prabhudas Lilladher recommended Hold rating on Hindustan Unilever with a target price of Rs 1874 in its research report dated January 17, 2019.
Prabhudas Lilladher's research report on Hindustan Unilever
HUVR reported 5th consecutive quarter of double digit volume growth (10% UVG) with 16.9% Adj. PAT growth in a stable demand scenario despite a high base. HUL is well placed to gain from 1) Premiumisation in Home Care, 2) success in naturals with Lever Ayush, Indulekha etc., 3) strong growth in emerging categories (premium laundry, hand wash, Liquid dish wash, Hair conditioner, Face-wash and Green tea) 4) synergy gains from acquisition of Glaxo Consumer healthcare with expected margin accretion of 800-1000bps over time and 5) gains from supply chain, data analytics and efficient inventory management. Farm distress seen in some pockets of rural India and rising competition in select categories can pose a near term challenge, however decline in crude prices will provide a near term tailwind.
Outlook
We estimate pro-forma EPS (including GSK acquisition) of Rs40.7 for FY21 and value the stock at 46x thus arriving at target price of Rs1874. Retain Hold.
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