Hindustan Unilever stock hits 9-month low; slips 26% from September high

Shares of FMCG company hit an over nine-month low of Rs 2,247.20, down 2 per cent on the BSE in Wednesday's intra-day trade amid concerns of moderate growth in the near term.

Shares of fast moving consumer goods (FMCG) company, Hindustan Unilever (HUL) hit an over nine-month low at Rs 2,247.20, down 2 per cent on the BSE in Wednesday’s intra-day trade amid concerns of moderate growth in the near term. The company’s underlying volume growth was flat in the December 2024 quarter (Q3FY25).

 

HUL was trading at its lowest level since May 6, 2024. It has plunged 26 per cent from its 52-week high of Rs 3,034.50 touched on September 23, 2024. In the past six months, HUL was down 18 per cent, as compared to 5.5 per cent decline in the BSE Sensex and 16 per cent drop in the BSE FMCG index.

 

HUL operates through segments - home care, personal care, foods & refreshments, and other operations. With 50+ brands spanning categories such as fabric solutions, home and hygiene, life essentials, skin cleansing, skincare, hair care, colour cosmetics, oral care, deodorants, tea, coffee, ice cream & frozen desserts, foods and health food drinks.

 

In Q3FY25 conference call, HUL highlighted subdued FMCG demand trends, with urban growth moderating and rural markets recovering gradually. December showed signs of moderation, but the company does not anticipate further stress in consumption trends. In the short term, subdued demand is expected to persist.

 

The management said they remain watchful of various macroeconomic indicators that could impact the pace of recovery, such as real wage growth, food inflation and employment levels. In this context, the company’s focus remains on driving competitive volume-led growth across business.

 

According to analysts at Nuvama Institutional Equities, HUL is a play on consumption growth in India. “The company has proved its ability to effect price hikes and ability to grow ahead of market, which, combined with improved outlook for S&D and personal care, and strong growth in processed foods and beverages, boosts our positive outlook on the company,” the brokerage firm said in the result update.

 

Meanwhile, FMCG sector’s one-year forward (P/E) valuations hold firm to the historical 10-year mean, but are at a discount of 11 per cent to the 5-year mean. Arresting the earnings cut ahead would be key for valuations, toward which the management needs to enhance execution and thus counter the dual stress of demand and inflation, said analysts at Emkay Global Financial Services in sector report.

 

The brokerage firm see possibility of either a re-rating or a de-rating being equal – a recovery in the topline growth (as per the Q3FY25 sector growth data from AC Nielsen) trend likely aiding a rerating, while persistent inflation further hurting demand would cause a de-rating. Relative earnings delivery of the FMCG sector will continue to impact valuations. Government tax stimulus from FY26 should help improve consumption and aid valuations, but FMCG players need to be aptly primed. Analysts maintain Underweight stance on the sector despite valuation comfort emerging on some players.

 

Analysts believe near-term earnings would be stressed, with inflationary pressure likely to hurt some players, while some others will see a high margin base in Q4FY25. Easing in prices of some food raw materials is likely to provide some respite in Q4.

 

“We believe the recent dole out of tax incentive from FY26 is likely to provide demand support, which should help improve the external setting. Valuations (1Y forward P/E) for Nestlé, HUL, Dabur, and Emami is now below the 5-year historical average,” the brokerage firm said.