Hold Hindustan Unilever, target Rs 1887: Edelweiss

Edelweiss has a hold call on Hindustan Unilever Ltd. with a target price of Rs 1887. The current market price of Hindustan Unilever Ltd. is Rs 1643.8. Time period given by the brokerage is a year when Hindustan Unilever Ltd. price can reach the defined target. Hindustan Unilever Ltd., incorporated in 1933, is a largecap company with a market cap of Rs 364470.22 crore.

Investment rationale by Edelweiss

Hindustan Unilever’s (HUL) Q1FY19 revenue, EBITDA and adjusted PAT growth of 11.2%, 20.6% and 22.5%, respectively, came in line with our estimates. The 12% YoY volume growth also came in line with our estimate. What’s even more encouraging is that the growth was broad based aided by gradual improvement in demand. Gross margin expanded ~197bps on account of favourable mix and judicious pricing. EBITDA margin also rose 185bps YoY despite ad spends jumping 27.4% YoY (up 155bps YoY)—the right strategy in our view. New launches, performance of Indulekha & Ayush and revival of rural demand are potential triggers. Maintain ‘HOLD’ as from current level (52.7x FY20E EPS), the stock offers limited upside.