Buy Hindustan Unilever; target of Rs 3080: Motilal Oswal

Motilal Oswal's research report on Hindustan Unilever

While headline numbers were close to expectations, this was aided by lower ad-spends and employee costs, which somewhat offset the lowest gross margin levels since 4QFY12. Management commentary indicated that material cost pressures may have peaked out, but with ad-spends reviving, we expect EBITDA margin improvement to earlier levels to arrive with a lag. Post this, we expect HUVR to get back to the erstwhile pace of mid-teens earnings growth that it consistently demonstrated in the five years before covid. We reiterate our Buy rating on the stock.

Outlook

While the pace of earnings recovery to double digit and then to mid-teens will be gradual, improving narrative will keep multiples high for the bellwether FMCG company. Rolling forward to Sep’24E EPS and maintaining our target multiple of 60x result in our target price of INR3,080 – 16% upside to CMP. We reiterate our Buy rating on the stock.

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