Hindustan Unilever hits record high in weak market, up 12% in one month

In the past one-month, HUL has outpaced the market by surging 12 per cent against a 3 per cent decline in the benchmark index, after reporting in-line April-June quarter (Q1FY20) earnings.

Shares of Hindustan Unilever (HUL) hit an all-time high of Rs 1,879, up 2 per cent on the BSE on Thursday, gaining 3 per cent in past three days in an otherwise weak market. The stock of fast moving consumer goods (FMCG) company surpassed its previous high of Rs 1,871, touched on December 17, 2018.

In comparison, the S&P BSE Sensex was down 0.71 per cent at 36,797 points at 12:42 pm, down 2 per cent against Monday's close.

In the past one-month, HUL has outpaced the market by surging 12 per cent against a three per cent decline in the benchmark index, after it reported in-line April-June quarter (Q1FY20) earnings. The outperformance of the stock has helped regain the Rs 4-trillion market valuation mark.

Analysts believe HUL’s outperformance is sustainable, as the demand scenario bottoms out and picks-up cyclically.

“As HUL expects growth to pick-up pace in H2FY20, we marginally trim our revenues for FY20E/FY21E to factor in muted performance in H1FY20. However, we marginally upgrade our earnings estimate for FY20E led by benign raw material cost, lower competitive intensity and continued efforts on cost savings, while trim our FY21E earnings estimate on the back of limited room for further savings,” analysts at Reliance Securities said in result review note. The brokerage firm maintains ‘buy’ rating on the stock with the target price of Rs 1,950 per share.

“HUL’s continued proactive approach toward product innovation and distribution enhancement provides a more sustainable competitive edge over peers. HUL’s best-in-class share price performance over the past two years has been supported by best-in-class operational performance and a sound business model (high on innovation, superior GTM capabilities, future-ready, digital excellence),” analysts at JP Morgan had said in a result update. However, the stock was trading above its March 2020 target price of Rs 1,850 per share.

“We are entering another patch of uncertainty (opportunity to outperform) but this time risk reward is not favorable,” analysts at HDFC Securities said. The brokerage firm maintains ‘neutral’ rating on HUL, which may change with further time correction in the stock, recovery in rural demand and successful integration of GSK portfolio (ability to surprise on margin expansion).