Dolat Capital recommended accumulate rating on Hindustan Unilever with a target price of Rs 1877 in its research report dated July 23, 2019.
Dolat Capital's research report on Hindustan Unilever
HUL’s volume grew +5% YoY and operational results were in line with our estimate. We are positive about this as (1) the base was unfavorable (+12%) and (2) the industry, across categories, is experiencing a slowdown. We expect the volume growth to remain in mid-single digit, due to an unfavorable base in next few quarters. Even a 6%+ volume growth is a positive, given HUL’s size. In addition, the GM and EBITDA margin rise on an unfavourable base (highest Q1 EBITDAM in 10 years+), indicates that margins have not peaked yet, and it may continue to gain from operating efficiency. However, lower rural growth (1x urban) remains a concern. In addition, moderation in demand is likely to pressurize volume growth in H1FY20. Nevertheless, HUL is likely to benefit from the expected rise in the government’s rural expenditure (farm loan waiver, rural stimulus, 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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