HUL stock nears 52-week low; will it recover?

Shares of FMCG major Hindustan Unilever Ltd (HUL) approached their 52-week low even as the market turned green in the afternoon session on Tuesday. The large cap stock fell 4.01 per cent intra day to Rs 1,969.25 against the previous close of Rs 2,051.45 on the BSE.

The stock was 3.54 per cent away from hitting the 52-week low of Rs 1,901.80 when it touched the lowest point of the day today.

A total of 9.90 lakh shares of the firm changed hands, amounting to a turnover of Rs 40.61 crore. Market cap of the firm fell to Rs 4.68 lakh crore on the BSE. The stock had hit its 52-week low of Rs 1,901.80 on March 8, 2022.

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Later, the stock closed 2.81 per cent lower at Rs 1,993 and was the top Sensex loser today. On NSE, the stock closed 2.85 per cent lower at Rs 1,992.80 and was the top Nifty loser today. However, Sensex closed 697 points higher at 57,989 and Nifty gained 198 points to 17,315.

HUL stock stands lower than 5 day, 20 day, 50 day, 100 day and 200 day moving averages. HUL share has lost 15.17 per cent in the last one year and 15.44 per cent since the beginning of this year. On the other hand, Sensex has climbed 16.42 per cent this year.

One of the key factors behind the fall in the stock is sharp inflation, which has affected consumption.

"High inflation is affecting volume growth. Down trading is being witnessed towards lower unit packs (LUPs) but not yet toward lower-end brands. The mix is deteriorating both YoY and QoQ in a quarter where relatively higher mobility should have brought back demand of high margin beauty products. Instead, the customer is tightening their purse strings on premium purchases," said financial services firm Motilal Oswal.

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"HUL's earnings have underperformed that of peers in recent quarters owing to: a) A higher proportion of the discretionary/OOH portfolio at 15-20 per cent of sales, b) steep commodity cost inflation in its three largest categories - soaps, detergents, and dish wash. Both these negatives continue to be at play with further material cost increases and delayed recovery in the growth in premium products. Earnings growth will bounce back to mid-teen levels once the above mentioned worries ebb. However, uncertainty remains over the next couple of quarters," the financial services firm added.

It has maintained a buy call on the stock with a target price of Rs 2,500, an upside of 22 per cent to the previous close of Rs 2,051. However, HUL is not among the top picks of Motilal Oswal.

Edelweiss Broking sees an upside of 11 per cent on the HUL stock. It assigned a target price of Rs 2,330 on March 17 when the stock stood at Rs 2,098.

"HUL is a play on consumption growth in India. The company has proved its ability to effect price hikes and ability to grow ahead of market. Non-structural factors like FII selling and anticipation of rural slowdown led to sharp stock price correction in HUL," said Edelweiss Broking.

"The company's ability to take strategically selective price hikes is unmatched. HUL  has  taken  three  more  rounds  of  price  hikes  in  Q4FY22 (though not  in  same  product/SKUs);  we  expect  more  hikes in Q1FY23, in line with price hike taken in Q3FY22," it added.The FMCG major reported a 16.8 per cent year-on-year rise in standalone net profit at Rs 2,243 crore in Q3 as India's largest consumer goods maker gained market share in both urban and rural areas amid COVID-19 pandemic.

The firm posted a net profit of Rs 1,921 crore in the year-ago period. Its revenue from operations climbed 10.2 per cent to Rs 13,183 crore as compared to Rs 11,959 crore in the corresponding quarter last fiscal. The EBITDA margin improved 100 basis points to 25.4 per cent YoY.