HUL surpasses ITC in market cap ranking first time since February 2005

Hindustan Unilever (HUL), the fast moving consumer goods (FMCG) company, has surpassed ITC, the cigarettes major, in market capitalisation (market-cap) ranking after a gap of more than one decade.

HUL with Rs 3,424 billion market-cap overtook ITC, which have market-cap of Rs 3,415 billion at 02:59 pm; the BSE data shows. Earlier, on February 22, 2005, HUL had market-cap of Rs 319.72 billion and ITC had market-cap of Rs 318.74 billion, CapitalinePlus data shows.

Currently, HUL stands at number fourth position in overall market-cap ranking. Tata Consultancy Services (TCS) is at number one rank with Rs 6,733 billion market-cap, followed by Reliance Industries (Rs 6,023 billion) and HDFC Bank (Rs 5,265 billion).

In past one month, HUL has appreciated by 10%, while ITC has risen 5% against 2.5% rise in the S&P BSE Sensex.

HUL was trading flat at Rs 1,576 after hitting a new high of Rs 1,598 in intra-day trade today. In past three days, the stock rallied 6% after the FMCG major reported a better than expected sales volume growth of 11% in Q4FY18.

HUL reported 20% increase in its standalone reported net profit to Rs 13.99 billion in Q4FY18, driven by a strong double digit volume growth. EBIDTA (Earnings before interest, tax, depreciation and amortization) margin improved 240 bps to 22.5% in Q4FY18 from 20.1% in Q4FY17.

HUL’s superior volume growth outperformance – even compared to much smaller players – is appreciable. Commodity inflation, unless it spirals out of control, is likely to increasingly contribute to sales growth, and margin trajectory is impressive and will be aided further by leverage arising from strong sales growth, analysts at Motilal Oswal Securities said in result update with maintain ‘buy’ rating on the stock and 12 month target price of Rs 1,805.

ITC was trading 2.4% lower at Rs 279 after the company on Wednesday reported lower than expected growth in overall EBIDTA and cigarette EBIT due to a drop in cigarette volumes of 2.5%.

Analysts at Antique Stock Broking expect cigarette volumes to recover particularly from 2QFY19.

“We understand that the slowdown in king size cigarettes and deterioration in cigarette's product mix has been arrested during the quarter. We now believe that majority of the pressure on earnings due to sharp rise in cigarette duties is already in the performance and will have a receding impact going ahead. From FY19, we expect cigarette volumes to recover and grow at 5% CAGR during FY18-20e,” the brokerage firm said in result review with maintain BUY rating on the stock with a target price of Rs 341.