Hold Hindustan Unilever; target of Rs 1253: Edelweiss
Edelweiss' is bullish on Hindustan Unilever has recommended hold rating on the stock with a target price of Rs 1253 in its research report dated July 18, 2017.
July 19, 2017 / 03:13 PM IST
Edelweiss' research report on Hindustan Unilever
Hindustan Unilever (HUL) reported in-line Q1FY18 revenue growth of 4.9% YoY, while EBITDA (14.1% YoY) and PAT (14.9% YoY) growth surpassed estimates. Volumes remained flattish versus our 1-2% YoY dip estimate; this is commendable, especially in light of destocking by CSD as well as trade channel imbalance on GST rollout from July 2017. Benign raw material prices helped gross margin expand 91bps YoY and 104bps QoQ. This, coupled with cost rationalisation (ZBB strategy) and calibrated A&P spends, aided EBITDA margin jump 173bps. New launches in the natural space (launched skincare natural brand Citra) as well as pan-India roll out of Ayush have been successful. We envisage HUL to be key beneficiary of GST and recovery in the staples space. Maintain ‘HOLD’.
We expect HUL to be key beneficiary of share gains helped by GST. Increased launches in the natural space and higher GST rate for herbal products are likely to boost share gains. At CMP, the stock is trading at 40.6x FY19E. On better-than-expected Q1FY18 numbers, we revise up FY18/19E EPS 2.6%/4.2%, respectively, and also our target multiple to 44x (earlier 40x) to arrive at revised TP of INR1,253 (INR1,106 earlier). We maintain ‘HOLD/SP’.
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