Downgrade HUL to neutral, target of Rs 224: Angel Broking

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Downgrade HUL to neutral, target of Rs 224: Angel Broking

Angel Broking has come out with a research report on Hindustan Unilever (HUL). The broking firm has downgraded the stock to neutral, with a revised target price of Rs 224 (Rs 294).

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Angel Broking has come out with a research report on Hindustan Unilever (HUL). The broking firm has downgraded the stock to neutral, with a revised target price of Rs 224 (Rs 294).

The report says, "With HUL's recent price cuts (around 30% in Rin) and with P&G upping the ante in price wars, we believe the competitive intensity in HUL's core category of detergents has clearly reached alarming levels. We believe that HUL is once again likely to witness the 2004 era of steep Margin erosion and Earnings fall, in turn justifying the fall in its share price and drop in valuation. HUL is currently trading at 19x FY2012E revised EPS of Rs11.7, a 40% premium to the Sensex v/s the 5-year average of 60-70% premium."

"Post revision in estimates, we have downgraded the stock to neutral, with a revised target price of Rs 224 (Rs 294) based on a P/E of 19x FY2012E (25% discount to its 5-year average) owing to weak Earnings growth vis-à-vis the FMCG Sector, uncertain Earnings environment and significantly higher competitive intensity," according to Angel Broking.

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To read the full report click on the attachment