Moneycontrol
May 18, 2017 03:17 PM IST | Source: Moneycontrol.com

HUL falls despite good Q4 results; analysts largely remain positive with up to 17% upside

The FMCG major had posted 6 percent rise in its March quarter net profit at Rs 1,183 crore, while its volume growth came in at 4 percent.

 
 
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Shares of Hindustan Unilever swung between gains and losses through the morning session despite steady Q4 results as the global selloff could have rubbed on to the stock. Profit booking due to stellar run in the past few sessions could also have dragged the stock.

The FMCG major had posted 6 percent rise in its March quarter net profit at Rs 1,183 core against Rs 1,114 crore posted during the corresponding quarter of last year. Its volume growth came in much ahead of what analysts polled by CNBC-TV18 had accounted for.

Analysts have largely cheered the results and have given positive views on the stock. The ones with positive views see an upside potential of 17 percent, while analysts with bearish tones see 27 percent downside.

Brokerage: Macquarie | Rating: Outperform | | Target: Rs 1,062 | Upside: 6.4%

The brokerage observed that HUL’s domestic volume growth of 4 percent was supported by re-stocking the trade channel. A higher volume growth also becomes the key catalyst for the stock, it said.

Macquarie also increased earnings by over 2 percent for FY18/19 on higher margin. The rating of outperform is based on recovery prospects in FY18 and margin rise, driven by parent strategy.

Brokerage: Jefferies | Rating: Buy | Target: Rs 1,150 | Upside: 15%

Jefferies said that the FMCG major remains its top pick in the large cap consumer space. Analysing its results, it said that robust growth in sustained refreshments such as tea delivered broad-based, double-digit growth. Meanwhile, modest growth in packaged goods such as Knorr growth was impacted by a strong comparator. Weakness in demand and increase in competition can put pressure on earnings estimates, the brokerage firm added.

Brokerage: Nomura | Rating: Neutral | Target: Rs 1,057 | Upside: 4.7%

Nomura observed that a sequential improvement in volume growth signifies recovery post demonetisation. It also sees pricing action returning to the portfolio.

The global research firm maintained revenue growth estimates at over 13.5 percent for FY18 and FY19, while margin estimates were increased to build in over 70 basis points improvement in margins to FY19.

Having said that, Nomura sees a challenge in further potential upside from current levels. Its top picks from the sector include Emami and Dabur India.

Brokerage: Citi | Rating: Neutral | Target: Rs 1,050 | Upside: 14%

Citi said that while results were better than other companies, better value was seen in ITC and Emami. It tweaked revenue growth by over 1 percent for FY18 as it dialed back some expected price hikes. The target multiple, Citi said, is pegged to the trailing 3-year average.

Brokerage: Bank of America Merrill Lynch | Rating: Buy | Target: Rs 1,110 | Upside: 7%

Monsoon, buyback or special dividend and GST-linked gains in the second half are key triggers to the stock. Price hikes will support margin. The global investment firm does not expect large valuation de-rating, given the improving earnings growth trajectory.

Brokerage: JPMorgan | Rating: Neutral| Target: Rs 1,025 | Upside: 17%

Broad-based growth witnessed across categories was impacted by high base, JPMorgan observed. The downside risk is on topline growth if the volume growth recovery is slow. It recommends buying into dips.

Brokerage: Morgan Stanley | Rating: Underweight | Target: Rs 795 | Downside: 21%

The global brokerage firm said that an important lever of margin expansion will be brand and marketing investments’ savings. It sees a risk of de-rating if the market doubts volume growth recovery with respect to the company.

Brokerage: Credit Suisse | Rating: Neutral | Target: Rs 1,100 | Upside: 13%

Credit Suisse said that FY18 margin can expand over 100 basis points as the company has many tools to save margin. It sees consumer demand is improving but still subdued. The global brokerage firm also sees a disruption in Q1 on the back of a GST roll out. It raised earnings estimates by over 2 percent on expectation of better margin.

Brokerage: Goldman Sachs | Rating: Neutral | Target: Rs 788 | Downside: 27%

Goldman Sachs increased FY18-20 earnings per share (EPS) estimates by 6-8 percent to reflect higher sales growth and margins. Faster rural recovery, higher GMs are the key upside risks, while high input costs and competition are the key downside risks.

At 15:16 hrs Hindustan Unilever was quoting at Rs 987.20, down Rs 19.15, or 1.90 percent on the BSE. It touched a 52-week high of Rs 1,014.00.
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