Motilal Oswal Suggests Buying This Consumer Goods Stock For 22% Upside

Brokerage firm Motilal Oswal suggests buying the stock of Hindustan Unilever (HUVR) for a 22% return. In 4QFY22, there was a limited impact of the third Covid wave.

Target Price

The Current Market Price (CMP) of Hindustan Unilever is Rs. 2051. Motilal Oswal has estimated a Target Price for the stock at Rs. 2500. The stock is expected to offer a 22% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 2051
Target Price	Rs. 2500
1 year return	22.00%

Company performance

HUVR's earnings have underperformed that of peers in recent quarters owing to a higher proportion of the Discretionary/OOH portfolio at 15-20% of sales, and steep commodity cost inflation in its three largest categories - Soaps, Detergents, and Dish Wash. Both these negatives continue to be at play with further material cost increases and delayed recovery in the growth in premium products. The company's sales are expected to reach Rs. 509.2 b, EBITDA is expected to reach Rs. 123.4 b, while Adj. PAT is expected to reach Rs. 87 b, in FY 22. High inflation has affected volume growth.

Comments by Motilal Oswal

Motilal Oswal said, "The company performed relatively better. Uncertainty remains over the next couple of quarters. We highlighted the ongoing challenges of sharp commodity inflation across Staples players in our recent sector update note. The elevated input cost inflation led us to cut our FY23E/FY24E EPS for HUVR by 10.3%/8.4%. Nevertheless, the structural story for HUVR remains intact. Down trading is being witnessed towards lower unit packs (LUPs), but not yet towards lower-end brands. Sharp inflation is affecting consumption. Cumulative growth, for categories in which HUVR is present, was flat with a high single-digit volume decline in Jan-Feb'21."

About the company

With over 85 years of heritage in India, Hindustan Unilever Limited is India's largest fast-moving consumer goods company. The company has 50+ brands spanning 15 distinct categories such as fabric solutions, home and hygiene, life essentials, skin cleansing, skincare, hair care, color cosmetics, oral care, deodorants, tea, coffee, ice cream & frozen desserts, foods, and health food drinks. Hellmann's, Cornetto, Horlicks, Clinic Plus, Ponds, Pepsodent, Kwality Wall's etc. are their brands.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. 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.