HUL share price falls over 5% in 4 days; is it a time to buy, hold or sell the stocks post Q4 earnings

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Updated: May 01, 2020 2:31 PM

With relaxation in supply constraints, HUL is now ramping up overall manufacturing output to nearly 80 per cent levels.

HUL share priceThe merger of GSK Consumer’s business with HUL would enhance the growth prospects of the foods and refreshment business in the long run

Hindustan Unilever (HUL) share prices corrected over 5 per cent during this week ahead of its March quarter earnings. HUL share price ended the Thursday’s session at Rs 2,195.70 apiece on BSE. The company posted a 3.43 per cent on-year drop in consolidated net profit at Rs 1,520 crore for the quarter ended on March 31 hit by nationwide lockdown triggered by the coronavirus pandemic. The company had posted a profit of Rs 1,571 crore in the year-ago period. Post fourth-quarter earnings, at least two research and brokerage firms have turned bullish on the stock. “Any correction in the stock price due to near-term uncertainties should be considered as an opportunity to invest in a category-leading and cash-rich company such as HUL from a long-term perspective,” brokerage firm Sharekhan said in its latest research report.

The research and brokerage firm has trimmed the earnings estimates for FY21 and FY22 of HUL to factor in near-term uncertainties. It has maintained its ‘buy’ rating to the stock with a revised target price of Rs 2,305. “The merger of GSK Consumer’s business would enhance the growth prospects of the foods and refreshment business in the long run,” it added. The firm highlights the key risk of impact on earnings in the near term if the coronavirus pandemic situation takes time to get back to normalcy.

Another research and brokerage firm Edelweiss has recommended to ‘buy’ the stock with a target price of Rs 2,550, an upside of nearly 14 per cent. “We expect HUL to be key beneficiary of the rural demand recovery. Although COVID-19 related lockdown will affect near-term volumes, we expect volumes and earnings to bounce back once things normalise,” Edelweiss said in its recent research report.

The company reported a 9 per cent on-year fall in the revenues for the period under review at Rs 9,011 crore The operating profit margin came in at 22.9 per cent, a 160 basis points (bps) on-year decline.

With relaxation in supply constraints, the company is now ramping up overall manufacturing output to nearly 80 per cent levels. “Demand trends remain uncertain but health and hygiene products are witnessing an uptick in demand which should somewhat offset the decline in the nonessential portfolio,” Emkay Global Financial Services said in its latest research report. The brokerage firm recommended to ‘hold’ the stock with a price target of Rs 2,300. “Given the downside risks from slow demand recovery and rich valuations, positives of a strong portfolio and execution seem already priced in,” it added. 

In a separate announcement, the company informed the proposal of a final dividend of Rs 14 per share, subject to the approval of the shareholders at the AGM. Together with the interim dividend of Rs 11 per share announced in November last year, the total dividend for the said period amounts to Rs 25 per equity share of face value of Re 1 each.

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