HUL hits new high, surges 34% in 5 months; market cap touches Rs 7 trillion

HUL share price today: The management expects demand to improve in the coming quarters while Ebitda margins are expected to remain at current levels

Shares of Hindustan Unilever (HUL) hit a new high of Rs 2,983, gaining 2.5 per cent on the BSE in Friday's intraday trade amid heavy volumes, on a healthy demand outlook. In the past six months, the stock of the fast moving consumer goods (FMCG) company has surged 34 per cent. In comparison, the BSE Sensex has rallied nearly 17 per cent during the period.

A sharp outperformance of HUL lifted the company's market capitalisation above Rs 7 trillion in the intraday trade.

In the April to June quarter (Q1FY25), HUL delivered a robust performance with an underlying volume growth (UVG) of 4 per cent. Underlying sales growth (USG) was 2 per cent due to the impact of price reductions taken during the year as the company passed on benefits of lower commodity prices to consumers. The management remains confident of the medium to long term potential of the Indian FMCG sector.

Meanwhile, according to Nielsen data up to July 2024, demand trends are consistent with the previous quarter. HUL, too, has confirmed that August 2024 saw similar demand trends. Rural growth has been outpacing urban growth (although three-year CAGR is higher in urban markets). The recovery in the mass segment has been slower than anticipated, mainly due to high food inflation during the quarter. The pickup in discretionary products was also slow.

In the base quarter (Q2FY24), a one-off benefit from the favorable resolution of an indirect tax litigation contributed to an additional 1 per cent sales increase, an 80bp improvement in Ebitda margin, and a ~5 per cent increase in profit after tax. Thereby, it will have some impact on reported performance. The price cut impact on revenue will be milder than it was in Q1FY25 (2.5 per cent impact), but due to the base quarter one-off tax adjustment, the price cut impact would look higher. The company's own initiatives will support volume growth, Motilal Oswal Financial Services said in its stock update report.

"HUL's wide product basket and presence across price segments should help the company achieve a steady recovery in growth. Under the new leadership of Rohit Jawa, HUL is expected to take corrective actions to address the white space, particularly in the beauty and personal care (BPC) and foods & refreshments (F&R). The company commands strong leadership in Home Care, which can be capitalised during improving macros," the brokerage firm said with a 'buy' rating on the stock and a target price of Rs 3,250 per share.

Further, the management expects demand to improve in the coming quarters while Ebitda margins are expected to remain at current levels.

"In the longer term, HUL's growth prospects remain good as management focuses on the following: (1) Promoting a diversified portfolio and spreading the price-value matrix to drive premiumization; (2) Continued focus on efficiency improvement – nanofactories, automation and scaling Shikar to 1.3 million outlets to drive overall cost saving initiatives; (3) Market development initiatives to gain market share across the portfolio; and (4) Strong execution capabilities (demonstrating the strength of the company with its diverse product portfolio and financial strength in this volatile and challenging environment)," Axis Securities had said in its Q1 result update. The brokerage firm has a 'buy' rating with a target price of Rs 3,030 per share.