Hindustan Unilever share price underperform Nifty, Sensex in one year . Should you buy, sell or hold. | Mint
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Business News/ Markets / Stock Markets/  Hindustan Unilever share price underperform Nifty, Sensex in one year . Should you buy, sell or hold.

Hindustan Unilever share price underperform Nifty, Sensex in one year . Should you buy, sell or hold.

Stock market today: The growth pick-up during festive season was not as anticipated feel analysts. The rural demand continues to remain weak. Near terms earnings prospects thereby remain weak as per analysts and competitive intensity remains high

Hindustan Unilever near term earnings outlook remains weak. (Mint)Premium
Hindustan Unilever near term earnings outlook remains weak. (Mint)

Hindustan Unilever share price has declined 7% in last one year and was down almost 1% in intraday trades on Monday. Hindustan Unilever remains amongst few underperformers compared to gains seen by the benchmark indices. The Nifty-50 index during the period is up more than 13% and S&P BSE Sensex is up 12.55% 

The volume growth remains a key concern for the companies in the consumer discretionary space and Hindustan Unilever has seen the impact. The Fast-moving consumer goods (FMCG) companies also have seen impact of rising adverting and promotions costs impacting their earnings as competition remains high. The weak rural demand remains a concern too. The monsoon season has not been satisfactory as rainfall distribution was not even and many regions didn’t receive adequate rainfall. Monsoon activity remained weak. The rising food prices and no uptick in Rural wages also remains a reason for rural demand recovery remaining elusive.

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The July September quarter revenue growth stood at 4% YoY which was lower than 16% seen in Q2FY23 and 7% in Q1FY24 pointed out analysts at HDFC Securities. The Domestic volume growth, at 2%, also came below their estimates of 3%.

After weak Q2 performance analysts don’t see much respite to have taken place in October.

Analysts at Jefferies India Pvt Limited in their report on October volume performance said that “Our channel checks & industry interactions indicate October demand trends remained similar to second quarter, with much anticipated growth pick-up during festive season not materializing". As per Jefferies, the industry volumes grew mid-single digits, with two years CAGR (Compound annual growth rate) still sluggish at 2%.

Rural and bottom-of-pyramid sentiment remains muted with an evident dent from a weak monsoon. This along with a jump in food prices negated a potential rural uptick during the festive season, they said.

Pricing growth has turned negative said analysts at Jefferies referring to the Nielsen data, as trade pipelines adjust and product price reductions taken by companies now reflect in retail sales. Hindustan Unilever too should see a slight negative pricing growth in 3Q, they said.

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The ad spends are also likely to remain high and this would mean that Overall, Jefferies expects Ebitda margins to remain range-bound at levels seen in the last few quarters.

Put together, the near-term earnings outlook for Hindustan Unilever remains weak and analysts at Jefferies say that they remain on sidelines. Their target price for the stock stands at 2720. 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions


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Ujjval Jauhari
Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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Published: 11 Dec 2023, 04:37 PM IST
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