HUL Q2 Review: Systematix Maintains 'Hold' Rating, Hikes Target Price — Here's Why

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Systematix Report

We believe a confluence of improving demand trends in key categories (soaps, nutrition, skin, tea, detergents) can drive meaningful uptick in Hindustan Unilever Ltd.’s volume growth, which likely gets accentuated over FY27E-FY28E as HUL rejigs its portfolio to expand into high-growth categories (premium beauty, laundry/dishwash liquids, bodywash, international foods, high-science products in nutrition) and launches products to extract growth in portfolio gaps (such as Comfort Perfume Deluxe, Oziva skin care supplements, Horlicks Pro Fitness).

We also expect a pickup in operating profit margin over H2 26-FY28E driven by-

1. ice cream business demerger,

2. mix improvement and

3. better operating leverage as volumes pick up.

However, with valuations looking full (stock trades at P/E of 56x on FY27E EPS), we remain cautious on the name.

Valuation: We lower our FY26E-FY28E revenue (and PAT) estimates by 1-4% mainly to factor in separation of the ice cream business, and build revenue/PAT CAGR of 6%/5% over FY25-FY28E.

We maintain our Hold rating; we roll forward valuation to September-2027E EPS (from June-2027E) and value the stock at P/E of 54x (in-line with its past long-period average), leading to a target price of Rs 2,650 (vs Rs 2,575 earlier).

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