Dolat Capital recommended accumulate rating on Hindustan Unilever with a target price of Rs 1877 in its research report dated May 06, 2019.
Dolat Capital's research report on Hindustan Unilever
HUL’s volume growth (+7%) and operational results were in line with our estimate. We are positive about this as (1) the base was unfavorable (+11%) and (2) the industry, across categories, is experiencing a slowdown. We expect the volume growth to remain in high single digit, due to an unfavorable base in the next few quarters. Even a 6%+ volume growth is a positive, given the size of the company. In addition, the GM and EBITDA margin increase on an unfavourable base (highest Q4 EBITDAM in 10 years+), indicate that margins have not reached a peak as yet, and HUL is likely to continue to gain from operating efficiencies. However, lower rural growth (1x urban) is a concern. Nevertheless, HUL is likely to benefit from the expected rise in the government’s rural expenditure (farm loan waver, etc.).
Outlook
We maintain our FY20E and FY21E EPS at ` 33.5 and `37.4 and TP of `1,877. (50x FY21E). Maintain Accumulate.
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