Brokerages keep 'buy' on HUL, see 16% EPS growth

Mumbai: Most brokerages have maintained 'buy' rating on fast moving consumer goods major Hindustan Unilever (HUL) after the company reported strong December quarter earnings. Shares of HUL ended up 2.68% at ₹2,322.20 on Friday.

"HUL is better positioned in India FMCG, given longevity of earnings growth, better preparedness to handle disruptions, benefit from a price-straddle approach, and recent share gains," said CLSA, maintaining an 'outperform' rating with a target price of ₹2,725.

Antique Stock Broking, Nomura, Jefferies, Investec and Edelweiss have maintained 'buy' ratings on the stock.

Hindustan Unilever on Thursday reported a 18.7% increase in consolidated net profit to ₹2,300 crore for the December quarter. The company had posted a net profit of ₹1,938 crore in the same period of the previous financial year.

Brokerages highlighted concerns over pressure on volumes and margins due to surging inflation. Axis Capital has upgraded the stock saying that it would prefer sector leader Hindustan Unilever in this inflationary scenario.



"While weak volume growth and RM (raw material) inflation is a headwind in the near term, HUL should deliver 16% EPS compounded annual growth rate over FY22-24," said Jefferies.

Investec and Morgan Stanley have cut price targets by 8% each. The slowdown in market growth indicates that volume growth for the sector for the next few quarters will be challenging but Hindustan Unilever is better placed given its leadership position and diversified portfolio, said Investec.