The brokerage firm Nuvama has reiterated its bullish stance on Hindustan Unilever with a ‘Buy’ rating and an unchanged 12-month target price of Rs 3,055. Furthermore, the brokerage in its report also noted some concerns that could weigh on short-term performance.
Nuvama on HUL: Expansion in D2C
According to the brokerage report, HUL made major moves in direct-to-consumer (D2C) expansion in FY25. The company acquired skincare brand Minimalist which clocked Rs 5,000 crore revenue for Rs 2,700 crore in April , marking one of its largest D2C plays.
HUL also brought in two new international names from its parent portfolio – ‘Liquid I.V.’ and ‘Hourglass’. The brokerage furthermore noted that, “HUL sharpened focus on D2C, TAM expansion, digital and affordability in FY25.”
Despite PFAD costs staying high during the year, Nuvama expects some softening in the months ahead. “Future Core brands are growing 20% faster than market while Market Makers are expanding 50% faster,” the brokerage noted.
Nuvama on HUL: Q1 Outlook
According to the brokerage report, for the upcoming Q1FY26 earnings, volume growth is expected to come in at 3% to 4% year-on-year, compared to 2% in Q4FY25.
While that shows sequential improvement, analysts remain cautious due to commodity price fluctuations and uncertain demand in certain categories.
In the home care segment, price cuts led to volume uptick, whereas personal care pricing remained muted due to inflationary input costs. Food saw low single-digit price hikes, as per the brokerage report.
Nuvama on HUL: Brands and digital game
As per the HUL’s digital marketing spends now account for 40% of total ad investments, giving a massive push to its online presence. The company also saw gains through e-commerce and Q-Commerce channels, contributing 2-3% and 7-8% respectively to the India business.
Pre-tax Return on Equity (RoE) and Return on Capital Employed (RoCE) saw marginal gains up to 20.5% and 28.7% respectively. The working capital cycle improved to -60 days, compared to -54 days in FY24.