Motilal Oswal neutral on Hindustan Unilever

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Motilal Oswal neutral on Hindustan Unilever

Motilal Oswal has maintained neutral rating on Hindustan Unilever (HUL) with a target of Rs 352, in its February 7, 2012 research report.

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Motilal Oswal has maintained neutral rating on Hindustan Unilever (HUL) with a target of Rs 352, in its February 7, 2012 research report.

"Hindustan Unilever (HUL), though growth in the overall FMCG market slowed to 10% during the quarter (from 15% in 2QFY12), Hindustan Unilever (HUVR) has not been impacted and performed well in both rural and urban markets. Volume growth in the soaps and detergents segment has been in mid-single digits with both the urban and rural markets contributing. Lower ad spends (in line with industry), continued premiumization and cost control contributed to strong margin expansion; the management is happy with current margin levels but did not comment on sustainability of the same."

"Personal Product volume growth was in the high teens; the negative realization impact was due to increased innovations in lower unit packs and higher levels of price promotion. Growth was driven by skin and hair care; oral care was weak and management is looking at increasing its offerings in the premium space which has seen faster pace of growth. The management said competitive intensity is here to stay; HUVR will continue to focus on its volume driven growth strategy in the future."

"We are revising FY12 and FY13 EPS estimates by 4% to factor in margin expansion in soaps and detergents and lower ad spends. Our volume growth estimates remain largely unchanged. We believe current valuations leave little scope for further re-rating given rising competition and threat to personal product margins in the medium term. The stock trades at 31.3x FY12E EPS and 27.1x FY13E EPS. We maintain our Neutral rating," says Motilal Oswal research report.    

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To read the full report click on the attachment