ICICI Direct has given Buy recommendation for Hindustan Unilever with a target price of Rs. 2715 in its research report issued on May 01, 2021
ICICI Direct’s research report on Hindustan Unilever
HUL posted strong set of results with 34.6% revenue growth led by 16% volume growth. Though the growth was aided by the low base quarter & consolidation of foods business, discretionary categories also saw a sharp recovery in Q4FY21. Home care and beauty & personal care (BPC) segments witnessed growth of 14.6% & 19.7%, respectively. Detergent category, which was adversely impacted in 9MFY21 saw strong recovery in Q4 due to increase in out of home activity. The growth in BPC category was also driven by volume as well as calibrated price hikes in the soaps category. Foods business grew 96% due to consolidation of nutrition business but on a like-to-like basis, the segment growth was 36%. Gross margins contracted 117 bps mainly on account of a sharp increase in palm oil, tea & crude based raw material prices. However, the company was able to pass on the increase in raw material cost partially in the last six months. Marketing spends & other overhead spends were down 127 bps & 172 bps, respectively. This helped the company grow its operating profit by 43.2% to Rs 2957 crore. Operating margins improved 146 bps to 24.4%. Led by strong operating profit growth, PAT witnessed growth of 41.1% to Rs 2143 crore. The company declared a final dividend of Rs 17/share.
We change our rating from HOLD to BUY with a revised TP of Rs 2715/share (earlier Rs 2600).