Arihant Capital has given Hold recommendation for Hindustan Unilever with a target price of Rs. 2368 in its research report issued on Apr 29, 2022
Arihant Capital’s research report on Hindustan Unilever
HUL’s Q4FY22 Net Revenue grew by 10.73% YoY to INR 13,767 Cr (2.44% QoQ). This beat our quarterly revenue estimate of INR 13,303 Cr by 3.49%. Q4FY22 Gross Margin contracted by 312bps YoY 49% (-667bps QoQ). This is indicative of the notable input cost pressures faced by the company during the quarter. Q4FY22 EBITDA grew by 8.48% YoY to INR 3,301 Cr (-3.71% QoQ). EBITDA Margin contracted by 50bps YoY to 24.98% (-134bps QoQ). This beat our quarterly EBITDA estimate of INR 3,193 Cr by 3.38%, and was largely in line with our EBITDA Margin estimate of 24%. Q4FY22 Consolidated PAT grew 7.6% YoY to INR 2,364 Cr (1.81% QoQ). PAT Margin contracted by 50bps YoY to 17.17% (-11bps QoQ). This beat our quarterly PAT estimate of INR 2,156 Cr by 9.6%. The overall performance of the company was in line with expectations- muted but positive. This is due to the rising commodity price pressures faced by the company. Material costs are at an all-time high, and about a 7% price hike was passed on. Most of the growth was price led as inflation continues to pinch consumers pockets leading to low volume growth for HUL.
We expect the performance for the next two quarters to be under pressure, but HULs robust financial management system, and agility to adapt to sudden market changes will allow the company to maintain current run rates. We assign a TP of INR 2,368 with an upside of 10.5%, valued at an FY24E EPS of INR 45, and a P/E of 53x. At current levels, we recommend that investors hold the stock.