Emkay Global Financial Services has come out with a research report on HUL's (Hindustan Unilever) Q2FY10 earnings. The research firm has downgraded the stock from accumulate to hold with price target of Rs 290/Share – valuing at 24X FY11E earnings.

"HUL's Q2FY10 performance had no surprises – with operating performance marginally ahead of estimates and net profit performance in line with estimates. Further, expansion of gross margins and back-to-back increase in A&P spends is in consonance with our report ‘Drawing Parallel’. HUL has taken corrective action to rejuvenate ailing brands and categories – through aggressive promotions, brand relaunch, corrective pricing and positioning- in pursuit of regaining the growth momentum. We would keenly watch the impact of corrective actions on the growth momentum and revisit our earnings estimates thereafter. Also, we draw your attention to the closing window of cost gains and the concurrent expansion in gross margins and robust earnings growth in ensuing quarter- owing to base- effects. We believe that, ensuing quarters i.e. beginning Q4FY10 will be most challenging for the consumer sector. Consequently, we maintain our FY10E and FY11E earning estimates at Rs10.9/Share and Rs12.1/Share respectively. At CMP of Rs283/Share-HUL is trading at PER of 26.0X FY10E earnings and PER of 23.4X FY11E earnings. We downgrade from accumulate to hold with price target of Rs 290/Share – valuing at 24X FY11E earnings –which is 5-year average multiple", says Emkay Global Financial Services.

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