Prabhudas Lilladher recommended accumulate rating on Hindustan Unilever with a target price of Rs 2083 in its research report dated October 14, 2019.
Prabhudas Lilladher's research report on Hindustan Unilever
We cut HUVR's FY20 and FY21 EPS by 1.1% and 2.6% despite 5% volume growth and strong margin expansion on account of 1) delayed rural recovery despite good monsoons 2) limited scope to increase margins from current level 3) liquidity issues in trade channels. Though the near term outlook remains cautious, HUVR is well placed to benefit from Rural uptick (favorable rainfall, higher crop prices due to food inflation and benefit of DBT) and structural urban drivers like categories of future (body-wash, hand wash, naturals, premium Home Care, color cosmetics etc.) and strong innovation pipeline in new generation products. Although HUVR is operating at lifetime high margins, agility in price actions, strong brand health and gains from cost efficiencies in supply chain, data analytics and inventory management will keep competition at bay.
We estimate 12.4% Adj. PAT CAGR over FY19-22 (12.7% including GSK Merger) and value the stock at 46xFY22 pro-forma EPS (including GSK acquisition) to arrive at a target price of Rs2083 (earlier Rs1967 based on 46xJune21 EPS). Retain Accumulate.
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