Buy HUL with a price target of 600: Macquarie Capital

In a chat with ET Now, Rakesh Arora, Managing Director and Head of Research, Macquarie Capital Securities, shares his views on HUL.

ET Now: I distinctly remember reading a research report from Macquarie on HUL and you clearly have the most optimistic scenario for HUL, what makes you bullish on HUL?

Rakesh Arora: One of the key thesis that we are pushing is that the premium grade consumption basket is seeing a much faster growth than the other grade. In that space, Hindustan Unilever, given its parentage, is able to really come out and launch products much faster. So, we think that HUL would see a much higher growth than the industry. We expect results to be very strong and should lead to rerating of the stock.

ET Now: So what is your eventual price target for HUL, stock is at 440?

Rakesh Arora: We have a price target of around 600 for HUL. So, that is a decent 30% upside from current levels.

ET Now: Which means to your mind HUL could trade at a PE multiple of 40 plus is not that wildly expensive?

Rakesh Arora: Tthat is not 40 plus but we are likely in the mid 30s and it is in line with the peers, where they are trading like Nestle, Procter & Gamble and Colgate. So, it is not uncharted territory that we are forecasting for Hindustan Unilever and with a 15% plus kind of earnings growth, it can easily trade at mid 30s kind of PE levels.