Hindustan Unilever Ltd.'s Capital Markets Day has prompted brokerages to focus on a potential reset in the FMCG major's growth profile, after the company laid out plans to raise capex, widen its medium-term margin framework and invest more aggressively behind premiumisation and new growth spaces.
HUL now targets 22-24% EBITDA margins in the medium term and plans to raise capex to 3% of sales from around 2% over the past five years. The company expects to unlock around 500 basis points through premium mix, operating leverage, cost savings and AI-led media effectiveness, with those savings available for reinvestment into growth.
Brokerages see the strategy as a move towards volume-led growth rather than simply protecting margins. Macquarie said consumption and premiumisation could account for 40% of incremental sales, with another 40% coming from market-making and 20% from new growth spaces.
Here's what brokerages are saying after HUL's capital markets day:
Macquarie
- Maintained 'Outperform'; Target Price At Rs. 2,860
- Sees the strategy targeting competitive, volume-led profit growth.
- Consumption and premiumisation expected to contribute 40% of incremental sales.
- Market-making expected to contribute another 40%, with new growth spaces accounting for the remaining 20%.
- EBITDA margin guidance widened to 22-24%.
- Capex expected to rise to 3% of sales from 2% over the next five years.
- Sees premiumisation and underpenetrated categories across Home Care, Beauty & Wellbeing, Personal Care and Foods as key opportunities.
- Says clarity on a pickup in volume growth remains important for near-term performance.
Nuvama
- Maintained 'Buy'; Target Price At Rs. 2,820
- Sees the 22-24% medium-term EBITDA margin framework as supportive of HUL's growth strategy.
- Expects around 500 basis points of savings through premium mix improvement, operating leverage, Future Savings Lab and AI-led media effectiveness.
- Sees incremental revenue growth split between consumption and premiumisation, market-making and new spaces.
- Notes capex will rise to 3% of sales from 2%.
- Expects 85% of capex to be allocated towards growth and savings, compared with 75% over the past five years.
- Expects FY27 performance to improve, supported by operational efficiency and cost management.
Morgan Stanley
- Maintained 'Equal-weight'; Target Price At Rs. 2,480
- Focus remains on volume-led growth.
- Consumption and premiumisation expected to contribute 40% of growth.
- Market-making expected to contribute another 40%, with innovation and new spaces accounting for the balance.
- Notes the EBITDA margin guidance has been widened to 22-24%.
- Capex is being increased to 3% of revenue.
HSBC
- Maintained 'Buy'; Target Price Cut To Rs. 2,440 From Rs. 2,450
- Sees volume-led growth as the key strategy.
- Expects growth to be driven by consumption and premiumisation, market-making and new spaces.
- Notes the wider 22-24% EBITDA margin framework.
- Expects growth momentum to improve over the coming quarters.
Jefferies
- Maintained 'Buy'; Target Price Cut To Rs. 2,450 From Rs. 2,850
- Sees the strategy focused on broader reach and segment-led growth.
- Identifies premiumisation, category creation and deeper distribution as key growth drivers.
- Notes the upper end of the medium-term EBITDA margin range has been raised to 24%.
- Remains focused on the company's ability to translate the strategy into stronger growth.
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