HUL Falls 5% In 2 Days, Brokerages Pessimistic After Q1 Volume Miss

HUL Falls 5% In 2 Days, Brokerages Pessimistic After Q1 Volume Miss
Shares of India’s biggest fast moving consumer goods company (FMCG) Hindustan Unilever (HUL) fell for the second day after the company’s first-quarter volume growth disappointed the Street.

HUL shares fell as much as 3 per cent today, taking its two-day loss to 5 per cent. HUL had announced its quarterly numbers just before the close of market hours yesterday.

HUL reported a 10 per cent jump in its net profit for the June quarter to Rs 1,174 crore which was in line with the Street’s estimates. But the volume growth of 4 per cent was below the Street’s estimates of 6 per cent.

Following disappointing volume growth in the first quarter, many brokerages have downgraded Hindustan Unilever shares. “Current valuations at 40 times FY18E EPS are expensive amid a weak macro climate, absence of pricing power and limited margin levers,” said domestic brokerage Religare in a note. Religare maintains “sell” rating on the stock.

Foreign brokerage CLSA maintains ‘underperform’ on HUL with target price of Rs 885 per share. It says company posted good performance in home care segment but other segments remain weak.

Citi also has a ‘sell’ rating on HUL for target price of Rs 825. The global brokerage says HUL’s volume growth and EBITDA were below estimates and management’s commentary is bearish on near-term outlook. It adds that growth in oral products continues to disappoint and it is difficult to be constructive at 45 times price to earnings in current outlook.

Shares in Hindustan Unilever ended 2.75 per cent lower at Rs 895.15 apiece on the BSE, whose benchmark Sensex index finished up 0.15 per cent.