Accumulate Hindustan Unilever; target of Rs 1614: Dolat Capital
Dolat Capital recommended accumulate rating on Hindustan Unilever with a target price of Rs 1614 in its research report dated May 15, 2018.
May 22, 2018 / 05:18 PM IST
Dolat Capital's research report on Hindustan Unilever
Q4FY18 posted robust volume and operational performance abetted by – (1) favorable rural base (2) normalisation of trade channels and (3) revamp of rural growth. We believe that the performance was encouraging considering HUL reported 8.5%/7.4%/18.0%/15.4% revenue/volume/EBITDA/APAT CAGR over Q4FY16-Q4FY18 compared to 0.6%/4%/11.7%/18.3% over Q4FY15-Q4FY16. In addition, HUL reported better volume performance compared to peers like Dabur, BCL, Marico, GCPL, etc. We expect that the volume growth would remain high in the coming quarters considering revival in the rural markets - 6%+ volume growth over a medium-term can be taken sanguinely considering the size of the company. GM and EBITDA margin expansion at an unfavorable base (highest Q4 GM in 10 years+) indicates that the margins have not peaked yet and the company would continue to gain from its operating efficiencies. Going ahead, we believe HUL would benefit from the favorable base, favorable monsoon this season, GST benefits and benefits of seventh pay commission.Outlook
We value HUL at 50x to arrive at TP of `1,614. Upgrade to Accumulate.
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