Hindustan Unilever hits fresh 52-week low; brokerages share mixed outlook

Shares of Hindustan Unilever (HUL) hit a fresh 52-week low of Rs 2,362.10, down 1 per cent on the BSE in Thursday’s intra-day trade. Since January, the stock of fast moving consumer goods (FMCG) major has slipped 11 per cent on concerns of the near-term growth and higher competition. In comparison, the S&P BSE Sensex was down less than 1 per cent thus far in calendar year 2024.

The market price of HUL fell below its previous low of Rs 2,365.50 touched on January 23. Currently, it is trading at its lowest level since July 2022. It had hit a record high of Rs 2,859.30 on September 21, 2021.

HUL had reported disappointing December quarter (Q3FY24) earnings with its consolidated net profit up marginally 1.4 per cent at Rs 2,509 crore over the previous year quarter.

The company’s revenue was down marginally by 0.3 per cent year-on-year (YoY) at Rs 15,294 crore, while volume growth was only 2 per cent YoY. EBITDA (earnings before interest, taxes, depreciation, and amortization) margins improved marginally 10 bps to 23.7 per cent from 23.6 per cent in Q3FY23. The company said weak rural consumer sentiment and delayed winter were behind its underwhelming performance.

Muted rural and mass segments led to overall volume growth being subdued at low single digits, and negative pricing has led to marginally negative revenue performance on a YoY basis, analyst at KRChoksey Shares and Securities said.

In the near term, concerns continue for HUL as rural India is yet to see any meaningful improvement in demand trends. However, HUL has continued to fare well compared to its comparable FMCG market and has continued to see market share gains. As the macroeconomic condition improves with respect to moderating inflation, stabilizing commodity costs, improved rural incomes, HUL will be well-placed to see a pick-up in growth, the brokerage firm had said in result update.

Analysts at Emkay Global Financial Services believe demand slowdown, competitive pressure, distribution stress, and rising royalty rates are likely to have an overhang on HUL’s valuations (46x P/E for FY26). Management commentary on demand setting remains unexciting, as demand recovery remains a hope on the emergence of tailwinds. Reinforcing general trade moat is now an added pressure, with changes in distributor margin structure, in our view, the brokerage firm had said in result update.

However, on a longer-term basis, HUL’s growth prospects remain strong as the management focuses on driving a broad-based portfolio and straddling across the price-value matrix to increase premiumisation; continued focus on improving efficiency – nano factories, automation, and scaling Shikar to drive overall cost savings initiatives; market development action to gain market share across the portfolio, and strong execution capabilities (which displays its strength in diverse product portfolio and strong financial prowess in this volatile and challenging environment), analysts at Axis Securities said.