hul share price: Should you buy, sell or hold HUL after Q2 earnings?

Despite prevailing inflationary worries and margin pressure on (), brokerages remained majorly positive on the FMCG company, with many pencilling in a strong upside in the defensive play.

The majority of brokerage firms suggest buying or holding the counter as they see a potential upside of 25%. However, some analysts cautioned that the demand outlook looks vague in the near term.

Global brokerage Citi maintained its buy call on HUL with a target price of Rs 3,050. “Broader demand recovery will likely require sustained deflation,” it said.

Hindustan Unilever registered a 22.2% YoY increase in net profit in the July-September quarter (Q2FY23), beating Street expectations despite sustained weakness in rural markets.

However, the company’s earnings before interest, taxes, depreciation and amortization (Ebitda) margin contracted 180 bps to 23.3% from 25% in the year-ago quarter.

HUL’s revenue increased 16.1% to Rs 15,144 crore, as against Rs 13,046 crore reported last year. HUL took price cuts in October 2022 mainly to pass on the benefit of a dip in palm oil prices.

HUL’s Q2FY23 revenue and EBITDA were up 16% and 8% were in line with our estimates while adjusted PAT is ahead of our estimates, said Nuvama Research. Volumes grew 4% YoY, it said.

“Margins continued to remain under pressure due to unprecedented inflationary headwinds. All segments have performed well, but the current inflationary scenario continues to be a concern,” it added with a target price of Rs 3,140.

Gross margins in H2 are likely to improve versus H1 due to easing vegetable/palm oil prices, it said, adding that other commodities are expected to remain inflated, which is a concern.

“We expect gross margins to recover sequentially from Q3FY23 onwards given palm oil has sharply dipped from the peak and maintain our ‘hold’ rating on the stock with a target price of Rs 2,800,” said ICICIDirect Research.

Strong growth in the fabric wash segment to continue through market share gains, premiumisation & innovation while sticky commodity inflation to sustain pricing growth in the medium term, it said.

Securities said three-year revenue and volume CAGRs stand at 10% and 3%, respectively. “EBITDA growth of 8% YoY was in line and we do not expect a quick volume and margin recovery in H2FY23.”

With ongoing demand disruptions in mass segments and structural pressures from new-age brands in the premium space, it sees limited surprise opportunities for HUL, maintaining a reduced rating with a target price of Rs 2,200 on the stock.

While the pace of earnings recovery to double-digit and then to mid-teens will be gradual, improving narrative will keep multiples high for the bellwether FMCG company, said

, reiterating its buy call with a target price of Rs 3,040.

HUL is focusing on premiumisation, market development to improve penetration in key categories and digitalisation to drive consistent double-digit earnings growth in the medium to long term, said domestic brokerage firm Sharekhan.

Leading position in some high-penetrated categories, thrust on innovation and market development to remain competitive and drive consistent earnings growth makes it a good pick from a long-term perspective, it added with a buy call and a target price of Rs 3,005.

A sustained slowdown in rural demand or persistent volatility in key input prices from current levels would act as a key risk to our earnings outlook in the near term, the brokerage firm said.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of the Economic Times)

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button