Reduce Hindustan Unilever; target of Rs 2450: HDFC Securities

HDFC Securities recommended reduce rating on Hindustan Unilever with a target price of Rs 2450 in its research report dated June 15, 2023.

Broker Research

June 16, 2023 / 12:29 IST

reduce

26 Aug, 2025 12:21

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HDFC Securities' research report on Hindustan Unilever

Our interaction with HUL management reinforced our thesis that demand pickup will be more gradual than margin recovery. The FMCG industry continues to witness MoM improvement, led by urban markets with rural sustaining its gradual recovery trend. With HUL initiating price cuts to adjust for a softening commodity basket, value growth will continue to tail off, thereby reducing the divergence between volume and value growth. Moreover, with a 1-3 quarter lag usually seen between price cuts and demand upticks, we expect volume recovery to be back-ended. In price cuts, with retailers are also lowering the inventory levels, primary growth will lag secondary growth in the near term. With falling RM inflation, regional and unorganised players are becoming competitive (vs. last two years). Inadequate pricing action (18% vs 30% cost inflation) negatively impacted GM (-600bps last two years); HUL has already recouped 300bps of the gross margin. The incremental expansion will be slower as the company is also passing off benefits to consumers. Moreover, A&P spending will also see a stepping-up in FY24.

Outlook

We maintain our EPS estimate for FY24/25. We value HUL at 47x P/E on Mar-25 EPS to arrive at a TP of INR 2,450. Maintain REDUCE.

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