Hold Hindustan Unilever; target of Rs 2724: Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on Hindustan Unilever with a target price of Rs 2724 in its research report dated January 19, 2024.

Broker Research

January 20, 2024 / 10:43 IST

hold

live

bselive
nselive

Volume

Todays L/H

Prabhudas Lilladher's research report on Hindustan Unilever

We cut FY25/26EPS by 4.2%/4.5% factoring in 1) sustained pressure on volumes 2) lower pricing element to support growth & ward off competition from local/regional players and 3) higher investments in A&P and capability building for LT growth. HC & BPC (75% of sales) continue to grow volumes in mid-single digits while F&R is under pressure due to volatile commodity prices and consumer downgrading. Rural growth is showing signs of pickup; however, a lot depends upon outlook for new crop. While long term growth story led by lower penetration and superior value proposition remains intact, near term growth challenges are likely to persist. We factor in GM/EBITDAM expansion of 90/30bps over FY24-26 as HUL invests gains from better mix and commodity pricing in advertising, royalty and innovations.

Outlook

We estimate CAGR of 9.2% in sales and 8.8% in PAT over FY24-26 and assign a DCF based target price of Rs2724 (Rs2786 earlier). We expect slow and modest recovery resulting in tepid growth in near term which will provide back ended returns. Retain Hold.

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