 "HUL slips 4% after posting Q3 results; most brokerages cut target price")
Shares of Hindustan Unilever (HUL),which owns brands like Dove, Vim, Surf Excel, and Horlicks, slipped 3.5 per cent in early trade on Thursday, logging an intraday low at Rs 2,258.65 per share on BSE. The selling on the counter came after the company reported its third quarter (Q3FY25) numbers on January 22, 2025, after market hours. Most brokerages cut their target prices while maintaining their ratings post HUL's Q3 results.
ICICI Securities maintained 'Add' but cut its target price to Rs 2,500 per share from Rs 2,950.
The brokerage also lowered its earnings estimates 6 per cent/8 per cent for FY25E/FY26E largely due to lower volume growth expectations and margin expectations.
HUL’s Q3FY25 numbers were below ICICI Securities estimates led by underperformance in its mass brands across segments along with consumers titrating consumption (shift to smaller packs) while revenue grew 2 per cent year-on-year (Y-o-Y) due to pricing.
"Though HUL is taking strategic actions to contemporise these mass brands along with a portfolio shift towards premium in beauty with the announcement of the acquisition of a Minimalist at a pre-money enterprise value of Rs 3,000 crore, implying a valuation of 6x EV/sales, time period during this transformation is likely to be tough for their growth performance given the macroeconomic context," ICICI Securities report read.
Similarly, Nuvama Institutional Equities retained 'Buy' on HUL but cut its target price to Rs 3,225 per share from earlier Rs 3,395.
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The brokerage cut FY25E/26E/27E earnings per share share (EPS) by 3 per cent/5 per cent/5 per cent given current raw material inflation.
As per Nuvama, HUL posted an overall in-line Q3FY25 result as compared to its estimates with net revenue/Ebitda growth of 1.4 per cent/0.8 per cent Y-o-Y, volumes flat Y-o-Y which were below estimates of 1–2 per cent as tea and soaps likely suffered over 5 per cent volume dip Y-o-Y. Ebitda refer to earnings before interest, taxes, depreciation, and amortisation.
The report further said, "After many quarters, pricing turned positive at 2 per cent. Home Care /Beauty and Well being grew 6 per cent/1 per cent Y-o-Y, whereas Personal Care contracted 4 per cent Y-o-Y; Foods stood flat Y-o-Y. However, the skin care portfolio (ex-winter) grew in a mid-single digit. HUL acquired Minimalist at 6x EV/sales; the valuation seems fair given the acquisition is large, profitable, synergistic and complementary."
Emkay Global Financial Services also retained 'Buy' on HUL with a Dec-25E target price of Rs 2,675 per share on 51x price -to-earnings (P/E) which is a 5 per cent discount to the last 5Y historical avg P/E.
The brokerage reiterated its positive stance on HUL, despite a sub-par financial performance and muted near-term demand outlook.
In the medium term, it sees HUL’s enhanced execution absorbing the impact of macro stress. Moreover, as the external consumption setting improves, analysts at Emkay expect HUL to post a relatively better show (low base).
HUL Q3 results
Fast-moving consumer goods (FMCG) major HUL reported an 18.9 per cent rise in its consolidated net profit at Rs 2,984 crore for the third quarter (Q3) as compared to a net profit of Rs 2,509 crore a year ago. Sequentially, the profit rose by 15.2 per cent.
Consolidated revenue rose 1.9 per cent at Rs 15,559 for Q3FY25, from Rs 15,259 crore year-on-year (Y-o-Y). Sequentially, revenue saw a marginal decline of nearly 1 per cent.
The company’s Ebitda for the quarter stood at Rs 3,695 crore, up slightly from Rs 3,666 crore in Q3FY24. However, the Ebitda margin fell 30 basis points (bps) to 23.7 per cent.