Sharekhan's research report on Hindustan Unilever
HUL remains a preferred pick among large consumer goods companies because of its leading position in 85% of the portfolio (helps it take pricing actions in highly penetrated categories), gain in market share (consistent market share improvement despite demand slowdown), expanded distribution reach of 9 million outlets, strong cash flow generation and consistent dividend payouts. The company is focusing on premiumisation, market development, distribution expansion and digitalisation to drive consistent double-digit earnings growth in the medium to long run. However, a large focus will be on strong topline growth with moderate expansion in OPM. A gradual revival in the rural economy, good traction to winter care portfolio and price cuts post raw material price correction will help posting better volume growth in H2FY2023 compared to H1. Significant decline in prices of key inputs (including palm oil) will help the OPM to improve from Q3FY2023.
Outlook
We re-iterate a Buy on Hindustan Unilever (HUL) with an unchanged price target (PT) of Rs. 3,005. The stock trades at 53x/45x its FY2024/25E EPS, which is at a discount to its last five-year historical average.
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