HUL falls 4% after slew of downgrades
After falling nearly 7% in the early trade, HUL share closed the trading session at R460.2, down 4% or R21, its biggest intra-day fall in nearly two years. Earlier on Tuesday, the stock lost 3% as the third quarter numbers failed to please the street.
Leading brokerages reduced their rating on the stock citing the hike in royalty payment and an expected rise in tax rates as negatives. The December quarter volume growth that fell to its lowest in three years raised concerns of a lack of future growth driver for the company.
Morgan Stanley wrote HUL's earnings upgrade cycle has peaked and that rise in royalty payment is a likely de-rating catalyst for the stock. the brokerage expected sharp increase in the tax rate of about 700 basis points (bps) till fiscal 2015 that could result in muted earnings growth in the period.
On Tuesday, HUL announced a phased-in rise in royalty rates to be paid to Unilever that owns 52% in the Indian arm from 1.4% of net sales currently to 3.15% by 2017-2018. The increase
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