Should you buy HUL after Q2 numbers? Here's what brokerages say

The FMCG major posted a 10 per cent volume growth during the quarter, compared with 12 per cent growth in the immediately preceding quarter and four per cent a year ago.

Shares of Hindustan Unilever (HUL) slipped as much as 3.23 per cent to Rs 1,511.40 apiece on Monday. The company announced its September quarter earnings on Friday where it reported a 19.51 per cent increase in net profit at Rs 15.25 billion. Sales came in at Rs 91.38 billion as against Rs 81.99 billion in the year-ago period, up 11.45 per cent. 

The FMCG major also posted a 10 per cent volume growth during the quarter, compared with 12 per cent growth in the immediately preceding quarter and four per cent a year ago.

Majority of the analysts are bullish on the stock saying the company is on a strong fundamental footing and the trend is likely to continue going forward. However, some analysts appear cautious on the stock post the result announcement. 

Motilal Oswal Securities said HUL’s consistently superior volume growth outperformance – even when compared with much smaller players – is likely to continue. It noted that HUL not only offers the best earnings growth visibility in large-cap Indian consumer space but also has by far the highest return ratios, justifying premium valuations.

On a target multiple of 50x Sep’20 EPS (nearly 15% premium to three-year average due to significantly improving business fundamentals), the brokerage firm has derived a target price of Rs 1,900. It has maintained 'Buy' rating on the stock. 

"The rising crude prices and rupee depreciating against the dollar would lower the margin expansion in the near term but the price hikes taken of 3-4 per cent during the fag end of Q2FY19 (an in future if any) will help HUL to mitigate this pressure," said Sharekhan. "However the focus on premiumisation and cost rationalization would continue to give strong support to profitability in the near to medium-term," it added. The brokerage has a 'buy' rating on the stock with the target price of Rs 1,900.

Kotak Securities termed September quarter as an in-between quarter: neither great nor bad. It said the quality of earnings growth was slightly inferior with lower price-led growth reflecting increased competitive intensity at the margin and the need to play the ad spend line of the P&L. "The earnings print did fall short of supporting stiff forward expectations," the brokerage firm added. It has a 'Reduce' rating on the stock with the target price unchanged at Rs 1,430. 
 

At 10:10 am, shares of the company were trading at Rs 1,523.45 apiece on BSE, down 2.88 per cent.