Prabhudas Lilladher has given Buy recommendation for Hindustan Unilever with a target price of Rs. 2900 in its research report issued on Jan 20, 2022

Prabhudas Lilladher’s research report on Hindustan Unilever

We are upgrading HUL to BUY even as we change FY22/23/24 EPS by 0.6%/ -2.7%/ -3.5% on lower margin expansion assumption for FY23/24 (50/60bps). Near term volume outlook is cautious due to 1) tepid sales growth of 6.9% in personal care and 3.3% in Food and Refreshments 2) lack of visibility on rural demand recovery 3) 2% volume growth impact due to grammage reduction in LUP’s and 4) further price hikes to counter 30% YoY input cost inflation (Ocean freight 200%, Crude oil 80%, CPO 60% and Polyethylene 40% YoY). However, we remain positive on the longer term structural story given 1) sustained market share gains 2) strong innovation pipeline 3) scale up in emerging categories (Green Tea, Fabric Conditioner, Liquid Detergents, Liquid Dishwash, Hair conditioner) and 4) distribution gains from strategies like WIMI and SHIKHAR. We expect 10.9% Sales and 13.6% PAT CAGR over FY22-24 and assign a DCF based target price of Rs 2900 (Rs 2930 earlier).

Outlook

We believe risk reward is favorable at 44x FY24 EPS and ~2% dividend yield. BUY.

More Info on Trent

At 15:59 hrs Hindustan Unilever was quoting at Rs 2,283.00, down Rs 13.50, or 0.59 percent.

It has touched an intraday high of Rs 2,317.85 and an intraday low of Rs 2,279.00.

It was trading with volumes of 64,236 shares, compared to its thirty day average of 90,913 shares, a decrease of -29.34 percent.

In the previous trading session, the share closed down 1.35 percent or Rs 31.50 at Rs 2,296.50.

The share touched its 52-week high Rs 2,859.10 and 52-week low Rs 2,104.25 on 21 September, 2021 and 24 February, 2021, respectively.

Currently, it is trading 20.15 percent below its 52-week high and 8.49 percent above its 52-week low.

Market capitalisation stands at Rs 536,411.69 crore.

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