Hold Hindustan Unilever; target of Rs 2775: Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on Hindustan Unilever with a target price of Rs 2775 in its research report dated July 20, 2023.

Broker Research

July 21, 2023 / 19:20 IST

hold

26 Aug, 2025 12:21

Volume

Todays L/H

Prabhudas Lilladher's research report on Hindustan Unilever

We cut our FY24/25 EPS by 5.3%/4.8% and rating to HOLD factoring in 1) tepid volume growth in 1Q in F&R and Personal wash 2) waning impact of pricing as HUL cuts prices to ward off competition from local/regional players and 3) higher tax rates (26% v/s 24.5% earlier). Although 73% of sales (HPC) are growing volumes in mid-single digits, market dynamics & trade and consumer inventory will enable gradual increase in volume growth. Although rural markets appear to have bottomed out, erratic weather conditions can increase inflation in daily use items and impact volume recovery. Although long term growth story led by lower penetration and superior value proposition remains, near term pressure on growth can’t be ruled out. We expect GM/EBITDAM improvement of 460/100bps over FY23-25 as benefits of lower RM will be partly neutralized by higher ad spends, royalty and lower operating income due to closure of marketing agreement with GSK Asia (Eno, Iodex, Crocin and Sensodyne) post Oct23.

Outlook

We estimate 8.7% Sales and 9.3% PAT CAGR over FY23-25 and assign a DCF based target price of Rs2775 (Rs2825 earlier). HUVR trades at 53.1xFY25 EPS. Downgrade to Hold.

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