Sharekhan's research report on Hindustan Unilever
In Q4FY22, HUL posted resilient numbers with revenues growing by 11% y-o-y (with sales volume standing flat) while OPM stood stable at 24% y-o-y despite a 300 bps decline in the gross margins Market share gains across categories and sustained double-digit growth in some of the premium categories helped HUL post higher sales volumes versus the industry (which saw a 7-8% fall in volume). Significant raw material inflation would keep margins stressed. However, calibrated price hikes and stringent cost savings across verticals will help OPM to sustain at 23-24% in the near term. Management is confident of rural demand recovery led by expectations of good monsoons and higher agri-incomes that would push demand.
HUL’s stock has underperformed broader indices for the past one year and is currently trading at 52.1x/43.3x its FY2023E/24E EPS. We maintain our Buy on the stock with an unchanged price target of Rs. 2,456.
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