Hindustan Unilever’s share price experienced a decline of over a percent on Thursday following the release of its earnings report for the quarter ended March 2024. HUL shares dropped by as much as 1.2% to Rs 2,218.00 apiece on the BSE, reflecting subdued Q4 results.
FMCG major Hindustan Unilever (HUL) reported a standalone net profit of Rs 2,406 crore in Q4FY24, marking a decline of 6% from Rs 2,552 crore in the corresponding period last year. Despite this, the company’s revenue from operations saw a marginal increase to Rs 14,693 crore from Rs 14,638 crore, YoY, with a 2% volume growth.
Within HUL’s segments, the Home Care (HC) segment grew by 1% YoY, while the Beauty & Personal Care (BPC) segment contracted by 2% YoY, and the Foods & Refreshment (F&R) segment delivered pricing-led growth of 4% YoY.
However, at the operating level, EBITDA declined by 1% YoY to Rs 3,435 crore, with the EBITDA margin contracting by 20 bps to 23.1%. Additionally, the company declared a dividend of Rs 24 per share.
Brokerages on Hindustan Unilever
Motilal Oswal on Hindustan Unilever
Motilal Oswal anticipates a turnaround in Hindustan Unilever’s volume growth, projecting a gradual recovery in FY25. They highlight the company’s expansive product portfolio and market presence across various price segments as factors that could facilitate a steady growth rebound.
The brokerage firm suggests potential for improvement in certain segments such as Beauty & Personal Care (BPC) and Foods & Refreshment (F&R), with close monitoring of execution under the new CEO.
Motilal Oswal considers the valuation at less than 45 times the FY26E EPS as reasonable, citing the company’s historical average Price-to-Earnings (P/E) ratio of 60x on one-year forward earnings over the last five years.
Given the perceived favorable risk-reward ratio, Motilal Oswal reaffirms its ‘Buy’ rating on HUL and sets a target price of Rs 2,900 per share, based on 55 times the FY26E EPS.
JM Financials on Hindustan Unilever
JM Financial suggests that margin expansion for Hindustan Unilever (HUL) is unlikely due to the absence of pricing leverage and the continuation of competitive intensity. The brokerage firm notes that HUL’s share price has experienced a significant correction, reflecting muted earnings growth in FY24E.
Despite this, JM Financial highlights that the stock’s very low return over the last three years and valuation below historical averages could potentially offer support on the downside, considering that most negatives are already factored in.
Given the challenging operating environment, JM Financial indicates that any rerating of the stock will depend on improved visibility regarding volume acceleration and achieving double-digit earnings growth.
JM Financial retained its ‘Buy’ recommendation on HUL shares while revising down the target price to Rs 2,640 per share from Rs 2,970 previously.
InCred Equities Hindustan Unilever
InCred Equities has decided to retain its HOLD rating on Hindustan Unilever shares, albeit with a revised target price of Rs2,400, down from Rs2,680 previously. The valuation of Hindustan Unilever is estimated at 46 times the FY26F EPS, adjusted from 48 times earlier.
They anticipate a subdued demand scenario in the near term but expect initiatives aimed at driving recovery in the mass and popular segments of the portfolio to contribute to gradual improvement.
InCred Equities acknowledges downside risk associated with lower-than-expected sales growth, while highlighting the potential upside risk of a faster recovery in EBITDA margin.
Religare Broking on Hindustan Unilever
In the near term, caution prevails as demand is anticipated to witness gradual improvement, while price growth is expected to remain in the low single digits or negative due to fluctuations in commodity prices.
Despite this cautious outlook, the company remains focused on driving premiumization and volume-led growth. Additionally, it plans to continue investing in brands and core growth, while also expanding towards distribution channels to capitalize on growth opportunities.
From a financial perspective, revenue, EBITDA, and PAT are projected to improve by 11.2%, 12.6%, and 13.2% respectively on a Compound Annual Growth Rate (CAGR) basis over FY24-26E. Thus, the company maintains an optimistic outlook on its growth prospects from a mid to long-term perspective.
Despite a healthy correction in the stock price and a slow pickup in the near term, the company reaffirms its ‘Buy’ rating. However, it has revised the target price downwards to Rs 2,802.
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