Sanjay Manyal, Research Analyst at ICICI Direct feels Hindustan Unilever's overall volume growth in the second quarter has certainly disappointed. Since valuations at this point are expensive, Manyal advises against buying the stock at this point in time.
Also read: HUL Q2 net up 17%, shrs slip on disappointing volumes Here is the edited transcript of the interview on CNBC-TV18. Q: How exactly did you read the HUL numbers and more than that how did you read the management commentary?A: I think we need to understand that overall volume growth could be taken as a disappointment but I think soaps, detergent as an overall segment has done well. We need to remember that this segment will only do well with the price hikes and not so much with the volume growth.
The major growth driver was over the personal product but this quarter there has been a growth of 12 percent. It is certainly a disappointment on an overall basis also. I think right now we need to understand one thing, we need to separate earnings from the valuations. Valuation is expensive so we are cautious on this stock at this point in time. Q: What is your your target price on the stock and what would you advice at this point in time?
A: We have a target price of Rs 522 and we are not advising a buy at this point in time for sure. Q: How would you stack up ITC versus HUL right now after looking at both sets of numbers?
A: I think ITC numbers were much better. There has been a consistent growth over the years. We can see performance between the two categories now. The FMCG segment of ITC is doing well with the 26 percent kind of growth they have shown this quarter. That has been more positive in the sense of the overall growth margins sustainability and the consistent performance which they have shown over the years.
I think HUL has started doing well of late, for the last two years we need to understand that they are in more penetrated categories where the volume growth can take a hit probably over a longer period of time.
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