Hindustan Unilever Ltd. (HUL) may well have reported its slowest growth in seven quarters, but market participants remain bullish on the country’s largest pure-play fast moving consumer goods company, whose growth is often looked upon as a barometer of the broader consumer sentiment.
Brokerages like Citi, Jefferies, CLSA, Motilal Oswal, Edelweiss and HDFC Securities among others have all said that while low growth is a concern, the company is best suited to gain once the macros fall in place.
Some of the brokerages, while marginally lowering the target price, are betting on factors like continuous margin expansion, steady earnings, complete integration of GlaxoSmithKline Consumer Healthcare (GSK) portfolio and expected recovery in rural demand.
‘Steady outcome’
“HUL’s business model has ample levers to flex, to ensure a reasonably steady outcome, despite challenging macro,” stated Citi in its latest report while maintaining its neutral rating on the stock.
In a similar context, Jefferies said that the company “continues to execute better than peers on most parameters” while increasing earnings per share estimates “to reflect higher margin trajectory given benign input costs”.
While Jefferies has increased the target price for the stock from ₹1,820 to ₹1,900, Citi has marginally lowered its target price from to ₹1,850 from the earlier ₹1,867. On Tuesday, HUL announced its first quarter numbers, reporting a 7% growth in volume with the net profit rising 15% at ₹1,755 crore.
Domestic major Edelweiss Securities is of the view that HUL will be a key beneficiary of the anticipated rural recovery and herbal push and expects its decent volume growth to sustain.
While maintaining its buy rating, it added that it expects better earnings growth with the company's sustained push-for-premium approach.
With a turn in macros, HUL will be the first to bounce back given the inherent strength in its business, said HDFC Securities in its report post the earnings announcement.
Shares of HUL gained 2.06% on Wednesday to close at ₹1,728 even as the benchmark Sensex lost 0.36% to close in the red for the fifth straight session.