Buy Hindustan Unilever, target Rs 2,120: Motilal Oswal Securities

Motilal Oswal Securities has a buy call on Hindustan Unilever (HUL) with a target price of Rs 2,120.

The current market price of Hindustan Unilever is Rs 1,743.70.

Time period given by the brokerage is one year when Hindustan Unilever price can reach the defined target.


Investment rationale by the brokerage-
There is no material change to our forecasts. Continued healthy volume growth (despite a challenging base) and strong EBITDA growth (despite absence of significant price increases) augur well for sustainability of earnings growth.

HUL’s consistent and superior volume growth outperformance, even when compared with much smaller players, provides huge comfort. We expect this trend to continue, offering the best visibility among staples from a volumes growth perspective.

Four key trends are particularly relevant for HUL resulting in an elevation in its earnings growth trajectory of nearly 20 per cent compared to the past: (1) Rapidly improving adaptability to market requirements, as exemplified by its ‘Winning In Many Indias’ (WIMI) strategy. (2) Recognition and strong execution on Naturals. (3) Continuous strong trend toward premiumization. (4) Extensive plans to employ technology, creating further entry barriers.

HUL not only offers the best earnings growth visibility in the large-cap Indian consumer space, but also has by far the highest return ratios, justifying premium valuations.

On a target multiple of 54x Dec’20E EPS (nearly 20 per cent premium to three-year average due to significantly improving business fundamentals), we derive a target price of Rs 2,120. Maintain Buy.