Brokerages maintain divergent views on HUL despite steady Q1

MUMBAI: Some brokerages raised target price on the Hindustan Unilever stock following its June quarter result while others downgraded it citing expensive valuations.

CLSA, Edelweiss, HSBC, ICICIdirect, Motilal Oswal and Nomura increased target price on the stock by 4-18 per cent. However, Antique Stock Broking, Nomura and Jefferies have downgraded the stock.

Shares of HUL ended down 4 per cent at Rs 1,683.75 on Tuesday.


The FMCG major on Monday reported at 19.17 per cent year-on-year jump in net profit at Rs 1,529 crore for the quarter ended June. An ET NOW poll had predicted a net profit of Rs 1,525 crore.

“While HUL delivered a steady Q1 helped by a low base, we believe the volume growth trajectory is likely to taper down as base normalises and overall demand pick-up remains modest. The stock has runup sharply in last 18 months and now trades at 54x FY20 PE (vs last 5-year average PE of 42x and 10-year at 34x),” said Jefferies.

Even some of the brokerages which have raised target price on the stock have maintained ‘hold’ rating due to expensive valuation.

“We remain confident about HUL’s commitment towards volume-led growth backed by new launches and premiumisation. We estimate the company will report revenue and PAT CAGR of 12.7 per cent and 21.9 per cent, respectively, in FY18-20. However, on account of a sharp price rise, we maintain our HOLD rating,” said ICICIdirect. CLSA also concurred that valuations are expensive but added that in these uncertain times, they are likely to remain so.