In an interview with CNBC-TV18, Varun Lohchab gave his analysis of HUL‘s first quarter earnings and shared his outlook on the FMCG industry in general.
FMCG major Hindustan Unilever (HUL) posted weak set of June quarter earnings on Monday: volume growth was muted (4 percent) while revenue growth (3.6 percent) was below street estimates.
The quarter put paid to hopes that a broad lift-off in domestic consumption was around the corner, as a revival in sentiment would have likely reflected in the numbers of India's largest consumer company.
Varun Lohchab of Religare Capital Makets believes that HUL faces gloomy prospects both due to its size as well as a broad slowdown in consumption.
Given the outlook offered by the management during its earnings call, he thinks a quick rebound is unlikely in the near term either.
"Some of the states most affected by the drought have seen a sharp slowdown, may see some bounce back [thanks to the normal monsoon this year] but even urban is still weak," he told CNBC-TV18 in an interview. "The slowdown is all-pervasive."
Lohchab said HUL shares could give back most the gains they've notched up this year (from about Rs 750 to Rs 950). Religare's target for the counter is Rs 800, predicated on single digit earnings growth in FY17-18 and forward PE for 40.
HUL is not the only consumer firm that is facing headwinds.
Lohchab has a sell rating on Marico, Dabur, Emami as well as Godrej. "Industry volumes have been slowing down. Lever feels the heat more due to competition from small players. But most of the FMCG stocks are fully valued and given the earnings outlook, they will be pressured."
Watch video for the complete interview.
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