HUL shares decline 5%; top global brokerages keep positive view on the stock

Shares of Hindustan Unilever (HUL) declined over 5 percent in morning trade on BSE on May 4, reacting to the company's March quarter scorecard.

The company on April 30 reported a profit of Rs 1,519 crore in the fourth quarter, registering a 1.2 percent decline YoY due to the lockdown in the second half of March.

Most brokerage firms forecast fell in earnings as well as volume disruptions but they maintained a 'buy' rating on the stock. After a 14 percent rally, most experts feel that valuations still remain high but it is a good 'buy on dips' stock in the long-term.

Credit Suisse (CS)

As per CNBC-TV18, CS has an 'outperform' call on HUL with a target price of Rs 2,400.

CS finds Q4 decline not relevant as it was driven by the last 10 days' performance. CS cut HUL's earnings marginally by 2-3 percent.

"Lower ad spends, cost savings and input cost tailwinds will offset lower revenue growth. Earnings growth will also be aided by GSK merger impact," CS said.

CS highlighted that large-scale downtrading will be the key risk to watch out for.

HSBC

HSBC has a buy rating on HUL. It raised the target price to Rs 2,650 from Rs 2,350 but cited that the uncertainty on demand will persist.

"This one-off quarter doesn’t reduce the company's structural appeal," CNBC-TV18 reported HSBC saying so.

The company will spring back to growth as soon as the situation normalises, HSBC said.

HSBC is of the view that FY21 will still likely be a resilient year. Optically expensive valuation builds in reasonable long-term expectations, HSBC said.

Macquarie

As per CNBC-TV18, Macquarie has an outperform call on HUL with a target price at Rs 2,500.

It said adjusted Q4 profit was 10 percent below its estimates due to lower sales. Macquarie said the company is its top pick and a marquee recommended stock.

JPMorgan

JPMorgan has maintained a 'hold' call on HUL but trimmed the target price to Rs 2,397 from Rs 2,516, reported CNBC-TV18.

"Below-estimate Q4 results reflected on-ground reality for the FMCG industry during COVID. Pressures will continue into Q1 on likely change in consumer buying patterns," said JPMorgan.

JP Morgan has cut its estimates by 4 percent and 3 percent for FY21 and FY22, respectively.

"We build in weaker near and medium-term recovery. We are positive on the company's portfolio and execution capabilities and await a better entry point with valuations at 48 times FY22E earnings and lower earnings visibility," said JPMorgan.

Jefferies

As per CNBC-TV18, Jefferies has a buy call on HUL but cut the target price to Rs 2,525 from Rs 2,750.

Jefferies highlighted that the management commentary was cautious, but it refrained from providing demand outlook.

The global brokerage firm has cut FY21-22 EPS estimates by 3-5 percent to factor in lower revenue and said it did not see risk to margin and the company is better placed than peers.

Jefferies said near-term pressure in share price will be an opportunity to buy the stock.