Post HUL-GSK merger, these brokerages turn bullish on Hindustan Unilever; check new target prices

By: |
April 06, 2020 3:59 PM

Hindustan Unilever has pipped HDFC Bank to become India’s third-most valuable company in terms of market capitalisation. Brokerages have turned bullish on stock, check new target prices.

HUL, HUL share priceOn YTD basis, HUL share price has gained 12%. Last week, the FMCG major announced the completion of its merger of GlaxoSmithKline Consumer Healthcare.

Even as Indian share markets have been battered by economic fallout from fast-spreading coronavirus (COVID-19), FMCG giant Hindustan Unilever (HUL), is one such stock that remained resilient in a tough economic scenario. HUL share price gained 34 per cent in the previous fiscal year while the headline indices plunged over 25 per cent. Despite the headwinds of slowdown in Indian consumer sector, at least two brokerages are bullish on HUL with an upside up to 16 per cent and maintained ‘buy’ rating on the stock. In fact on a year-to-date (YTD) basis also, the stock has gained over 12 per cent. Last week, the FMCG major announced the completion of its merger of GlaxoSmithKline Consumer Healthcare Ltd (GSKCH).

While in a separate update, HUL board gave its approval to the acquisition of the Horlicks brand from GSK for Rs 3,045 crore as part of the option available in the original agreement made between its parent company Unilever and GSK. Besides, the company also announced that by the virtue of the merger, HUL will add GSKCH brands such Boost, Maltova and Viva to its portfolio.  

Research firm Macquarie sees a moderate impact from coronavirus and believes GSK merger will act as a catalyst leading to significant earnings boost. “We see long term positive trends in some of the categories like personal wash and packaged/nutrition foods. We believe the GSK merger provides a strong platform to grow the foods portfolio,” Macquarie said in its research report with a target price of Rs 2,563, an upside of 16 per cent. At Friday’s close, HUL share price ended at Rs 2,153 apiece on BSE.

Apart from these, Hindustan Unilever has pipped HDFC Bank to become India’s third-most valuable company in terms of market capitalisation. At Friday’s closing price, HUL’s market capitalisation was Rs 4.66 lakh crore, against HDFC Bank’s Rs 4.46 lakh crore. Another research and brokerage firm Motilal Oswal maintained ‘buy’ on HUL with a target price of Rs 2,425, a 11 per cent upside. “HUL now need not pay royalty to GSK or parent Unilever for the use of the Horlicks brand in India. Also, there will be no royalty on R&D as research is done in-house in Indian operations of GSKCH, which is now owned by HUL. The company will have to pay royalty only if it uses Unilever’s shared services for technology,” Motilal Oswal said in its latest research report.

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