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Prabhudas Lilladher Report
We have reduced our rating to Hold given that the stock has given 21% return in past three months since our upgrade. While rural demand is showing gradual signs of a recovery, Hindustan Unilever Ltd.'s profit after tax compound annual growth rate is unlikely to be in double digits over FY24-26 given that-
raw material led gains have been derived in FY24 itself,
demand in categories like mass skin care and HFD remains under pressure and
rising competition in high growth liquid detergents where HUL has also launched Rin to counter competition from Godrej Consumer Products Ltd. and Wipro Ltd.
While HUL expects margins to improve over medium term led by - operating leverage, product mix improvement, supply chain synergies and remodeling in Horlicks portfolio, our estimates are already factoring in 80 basis points improvement over FY24-26.
We estimate 8.2% PAT CAGR over FY24-26 and assign DCF based target price of Rs 2698 (Rs 2543 earlier). The stock trades at 52.3 times June26 EPS which offers limited upside post recent run up.
Downgrade to Hold (Accumulate earlier)
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