HUL shares to continue minting money for shareholders; these factors playing well for the FMCG firm

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February 12, 2020 12:49 PM

Hindustan Unilever share is expected to continue creating wealth for the shareholders, as the FMCG major keeps growing in high teens, driven by premium product sales and cost controls.

hul, hindustan leverHindustan Unilever (HUL) has been one of the best-performing companies on the stock market over the past decade, in terms of both earnings and stock price.

Hindustan Unilever share is expected to continue creating wealth for the shareholders, as the FMCG major keeps growing in high teens, driven by premium product sales and cost controls. “The stupendous wealth generation track record of HUL is likely to continue. We raise our target multiple to 50 times FY22E EPS on the merged numbers,” Motilal Oswal Institutional Equities said in a report on Wednesday. The report also revised its HUL share price target to Rs 2,490, with a 16% upside, and maintained ‘Buy’ rating on the stock. HUL was trading at Rs 2,255, its peak price to date, at the time of publishing. The share witnessed a jump of 4.75% in intraday trade.

Hindustan Unilever (HUL) has been one of the best-performing companies on the stock market over the past decade, in terms of both earnings and stock price. The company has outshone several of its large-cap consumer peers during the same period. There are several factors behind HULs success. The FMCG firm’s strong earnings performance can be attributed to  “nimbleness, stringent cost savings, premiumization and best-of-breed analytics,” the report said, adding that these factors are likely to lever growth of the company in the future as well.

A further boost to HUL’s earnings comes from several other reasons. While the base is favourable in the coming few quarters, there is an expectation of demand recovery in the environment from the Q2 of FY21. Also, the GSKCH merger, price increase in soaps and lower crude costs will push earnings, the report added.

HUL is likely to mop up earnings at 18-19% CAGR over the next two years, in continuation of the past three years’ trend ending FY20E. “Earnings growth projections are extremely impressive, especially for a company the size of HUL,” the report said. The Indian arm of global FMCG firm Unilever — HUL — recently released its fiscal third-quarter earnings. Its strong numbers were driven by the home care range. “Home Care continued its trajectory of good performance with double-digit topline growth. In Fabric Wash, our focus on core and premiumization continues to yield strong results,” HUL said.

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