HUL spurts after foreign broker maintains 'outperform' rating

FMCG major Hindustan Unilever (HUL) jumped 4.81% to end at Rs 2088.35 after a foreign brokerage reportedly maintained an 'outperform' rating on the stock with a target of Rs 2,400 per share.

According to reports, the brokerage stated that GlaxoSmithKline (GSK)'s 5.7% stake sale removes the key overhang in the HUL stock.

Global healthcare major GSK on Thursday (7 May) sold its 5.7% stake in HUL for nearly Rs 25,500 crore. The deal was done at an average price of Rs 1,905 per share. GSK, which was holding nearly 13.4 crore HUL shares through its subsidiaries GlaxoSmithKline Pte and Horlicks, sold the stake via multiple block deals on the NSE. On Thursday, HUL shares fell 0.86% to Rs 1,992.50.

Among the buyers, Paris-based financial services company SociGale S.A picked up 1.29 crore shares for an average price of Rs 1,902 per share on NSE. The names of other buyers in the block deal were not disclosed. Current stock market rules require that the names of only those buyers buying at least 0.5% of a company's stake through a block deal should be disclosed after the close of the session's trading.

In December 2018, HUL approved the merger of GlaxoSmithKline Consumer Healthcare India (GSK CH India) with the company, in a deal worth Rs 31,700 crore to acquire Horlicks and Boost, among other health food drinks.

The all-equity merger transaction saw shareholders of GSK CH India getting 4.39 shares of HUL for every one share of GSK CH India. That, in turn, led to GSK Plc. holding 5.7% in HUL.

HUL is engaged in fast-moving consumer goods business comprising home, beauty and personal care, foods and refreshment.

On a standalone basis, HUL's net profit declined 1.24% to Rs 1519 crore on a 9.4% decline in net sales to Rs 8,885 crore in Q4 March 2020 over Q4 March 2019.

Domestic consumer growth declined by 9% with a decline of 7% in underlying volume growth. EBITDA for Q4 March 2020 stood at Rs 2065 crore, declining 11% year on year from Rs 2321 crore in Q4 March 2019. Reported EBITDA margin reduced by 40 bps (160 bps reduction on comparable basis after adjusting for accounting impact of Ind AS 116).

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