Reduce Hindustan Unilever; target of Rs 2550: HDFC Securities

HDFC Securities recommended reduce rating on Hindustan Unilever with a target price of Rs 2550 in its research report dated July 20, 2023.

Broker Research

July 21, 2023 / 17:29 IST

reduce

26 Aug, 2025 12:21

Volume

Todays L/H

HDFC Securities' research report on Hindustan Unilever

HUL’s revenue growth of 6% YoY was below our expectations (HSIE: 9%), as inventory de-stocking by trade (1-3 days) in anticipation of price cuts led to a 3% volume growth (2% four-year CAGR, HSIE 6%). Home care & BPC saw midsingle-digit volume growth while F&R volumes were flat. Benefits of GM expansion (+255bps YoY) were largely offset by (1) higher A&P spends; (2) capability building (restructuring in HFD portfolio); and (3) an increase in royalty rate which limited EBITDAM expansion to 55bps. In the near term, in a stable commodity scenario, growth will largely be volume led with pricing remaining flattish to slightly negative. With the resurgence of small players given softening RM inflation, HUL will continue to focus on (1) rebalancing price and volume growth; (2) building back gross margins; (3) stepping up A&P investments; and (4) defending market share. We model a gradual recovery in demand given the 2-3 quarter lag seen between price cuts and demand upticks.

Outlook

We cut our FY24 estimates by 2% to reflect near-term pressure. We value the stock on 47x P/E on Jun-25E EPS to derive a TP of INR 2,550. Maintain REDUCE .

For all recommendations report, click here