HUL slips 2% as it reduces prices of Lux, Lifebuoy and Dove soaps

Shares of Hindustan Unilever (HUL) slipped as much as 2 per cent to Rs 1,824.15 apiece on the BSE in the early morning trade on Wednesday after the company said it has cut prices of its Lux, Lifebuoy and Dove soaps in the past month following muted growth in the category.

At 09:55 am, the stock was trading 1.65 per cent lower at Rs 1,830.90 apiece on the BSE. In comparison, the benchmark S&P BSE Sensex was ruling at 37,551.90 levels, down 89 points or 0.24 per cent. 

“HUL does selective and judicious price changes across its portfolio in the normal course of its business. Given that the commodity prices are expected to remain benign for a certain time period, we have taken price reductions in the range of 4 per cent to 6 per cent in Lux and Lifebuoy portfolio, while it may be higher on certain packs in order to pass on the benefits to the consumers," Mint reported quoting a company spokesperson.

For the quarter ended June 30, 2019, the FMCG bellwether reported 15 per cent year-on-year (YoY) growth in its net profit at Rs 1,755 crore. Revenue for the quarter under review rose 6.6 per cent over the last year to Rs 10,114 crore, also in-line with the Rs 10,171 crore estimate. 

It reported a volume growth of 5 per cent as of June — the lowest since the third quarter of 2017-18.

Segment wise, the company's home care segment grew 10.1 per cent YoY, thereby sustaining a double-digit uptick for the fourth consecutive quarter that led to 104 basis points (bps) expansion in EBIT margin. However, beauty & personal care grew by 4.1 per cent YoY. Here, the growth was led by the premium segment, whereas the popular segment in personal wash was soft, said analysts at Edelweiss Securities in a results review note last month.

Foods & refreshments' revenue rose 9.2 per cent YoY with EBIT margin expansion of 72bps YoY led by core segments, seasonal factors and strong innovation.

Motilal Oswal Financial Services (MOFSL) believes the premium valuations of the company are justified as it has the best earnings growth visibility in the large-cap Indian consumer space, and also, the highest return ratios so far. "On a target multiple of 48x Jun'21 EPS, we derive a target price of Rs 1,970, with 16 per cent upside," the brokerage had said in a results review note. 

Other FMCG names were trading mixed in the trade. While Dabur was trading over 1 per cent lower at Rs 435 apiece on the BSE, Marico was quoting nearly a per cent lower at Rs 383.35. Britannia Industries, on the other hand, was trading nearly a per cent higher at Rs 2,712.70 apiece.  The Nifty FMCG index was trading 0.40 per cent lower at 28,812 levels with 9 components in the green and 6 in the red.