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Buy Hindustan Unilever For A Target Price of Rs 2330 Says Edelweiss Broking
Hindustan Unilever Limited (HUL) is India's largest fast-moving consumer goods corporation, dealing in a wide range of life-essential products. Lux, Lifebuoy, Surf surf, Rin, Wheel, Glow & Lovely, Pond's, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Simple, Love Beauty Planet, TRESemmé, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall's, Horlicks, and Pureit are among the company's top household brands. The stocks of the company currently trading at a market price of Rs 2,098.00 per share on the NSE and the brokerage firm Edelweiss Broking Ltd sees more upside for a target price of Rs 2330.
Key investment rationale for Hindustan Unilever Limited (HUL) as per the brokerage
- HUL is a play on consumption growth in India. The company has proved its ability to affect price hikes and ability to grow ahead of market.
- Non-structural factors like FII selling and anticipation of rural slow down led to sharp stock price correction in HUL.
- The company's ability to take strategically selective price hikes is unmatched.
- HUL has taken three more rounds of price hikes in Q4FY22 (though not in same product/SKUs); we expect more hikes in Q1FY23, in line with price hike taken in Q3FY22.
- It is noteworthy that HUL takes price hikes in a staggered manner, based on its view on RM prices, competition, and portfolio approach.
- In Q3FY22, HUL had price/mix growth of 8% YoY, and EBITDA margins, at a five-quarter high, expanded 99bp YoY.
- In CY22 so far, the spike in global food prices has been around +25%, amid the Russia-Ukraine conflict, which will eventually filter into domestic prices, giving farm incomes a boost.
- HUL already seeing decade-high market share gains, which is likely to continue in FY23, given that smaller players will be on the side-lines in inflationary scenario.
- It enjoys high pricing power due to expansion in market share: HUL's market share across its portfolio is above 2019 levels.
- Further, as offices/travel have resumed across sectors and cities in India, OOH and B2B consumption would improve, which are margin accretive.
Buy for a target price of Rs 2330
The brokerage has set a target price of Rs 2330 for the stock which implies an upside of 11% from the current market price of Rs 2,098.
INR depreciation impacts on price of imported raw materials, Ad spends likely to spike, due to increased and challenge in expanding market share given rising competition are the key risks of the stock as per Edelweiss Broking Ltd.
Disclaimer
The stock has been picked from the brokerage report of Edelweiss Broking Ltd. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
