Sharekhan has given Buy recommendation for Hindustan Unilever with a target price of Rs. 2456 in its research report issued on Apr 27, 2022

Sharekhan’s research report on Hindustan Unilever

In Q4FY22, HUL posted resilient numbers with revenues growing by 11% y-o-y (with sales volume standing flat) while OPM stood stable at 24% y-o-y despite a 300 bps decline in the gross margins Market share gains across categories and sustained double-digit growth in some of the premium categories helped HUL post higher sales volumes versus the industry (which saw a 7-8% fall in volume). Significant raw material inflation would keep margins stressed. However, calibrated price hikes and stringent cost savings across verticals will help OPM to sustain at 23-24% in the near term. Management is confident of rural demand recovery led by expectations of good monsoons and higher agri-incomes that would push demand.

Outlook

HUL’s stock has underperformed broader indices for the past one year and is currently trading at 52.1x/43.3x its FY2023E/24E EPS. We maintain our Buy on the stock with an unchanged price target of Rs. 2,456.

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