Many analysts who track India's largest FMCG company Hindustan Unilever Ltd. (HUL) are expecting it to report a subdued September quarter citing weak demand trends and limited signs of improvement.
Although most analysts have maintained their rating recommendations and price target on the HUL stock, they expect improvements to only be gradual going forward.
Of the 45 analysts that track Hindustan Unilever, 28 continue to maintain a buy recommendation, 14 are neutral, and three have a sell rating. Despite the slightly cautious commentary from the Street, the consensus is projecting a potential upside of 13.5 percent over the next 12 months.
Brokerage firm UBS believes that the heightened regional competition may impact the company's pace of volume recovery. It expects the company to protect its market share as competition from regional brands rises. "HUL may continue price cuts to retain volume growth," the UBS note said, adding that volume recovery in the near term will only be gradual.
UBS has a neutral rating on HUL with a price target of Rs 2,860.
HUL may report a weak September quarter according to Nomura as demand remains unchanged. It also expects a significant rise in advertising spends to impact the company's operating profit or EBITDA growth. For the quarter, Nomura expects the company to report volume growth in low-single-digits, as was the case in the June quarter as well.
Nomura maintained its buy recommendation on Hindustan Unilever with a price target of Rs 2,950.
Goldman Sachs expects HUL's volume and margin trends to continue lagging behind its peers throughout the financial year 2024. It also mentioned that a sequential expansion in EBITDA margin is unlikely as increased advertising spends will offset any improvement in gross margin. It has lowered its financial year 2024, 2025 and 2026 Earnings per Share (EPS) estimates by 1-2 percent to factor in the slower pace of volume and margin recovery.
The brokerage is neutral on HUL with a price target of Rs 2,725.
Macquarie's commentary may give some heart to investors as its channel checks point to steady demand trends. For the September quarter, Macquarie expects HUL's operating profit or EBITDA to rise 3 percent while net profit may rise by 7 percent compared to the same period last year. Steady festive demand and moderation of price cuts related to destocking pressures should aid HUL's volume recovery during the quarter, Macquarie said.
The brokerage has an outperform rating on HUL with a price target of Rs 2,950.
Shares of HUL ended 1 percent higher on Monday, September 11, but have been flat through the year.
First Published: Sept 12, 2023 8:13 AM IST
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