HUL share price falls after muted Q4 results; brokerages cut target price; Should you buy, sell or hold the stock?

Hindustan Unilever share price declined over a percent on Thursday after the company reported its earnings for the quarter ended March 2024. HUL shares fell as much as 1.2% to ₹2,218.00 apiece on the BSE after muted Q4 results.

FMCG major Hindustan Unilever (HUL) reported a standalone net profit of ₹2,406 crore in Q4FY24, registering a decline of 6% from ₹2,552 crore in the same period last year. 

The company’s revenue from operations rose marginally to ₹14,693 crore from 14,638 crore, YoY, with 2% volume growth.

HUL’s Home Care (HC) segment grew 1% YoY, whereas the Beauty & Personal Care (BPC) segment contracted 2% YoY and Foods & refreshment (F&R) delivered pricing-led growth of 4% YoY. 

Read here: Is consumption demand recovering? HUL bosses think so

At the operating level, EBITDA declined 1% YoY to ₹3,435 crore, while the EBITDA margin contracted 20 bps to 23.1%. 

The FMCG major also declared a dividend of ₹24 per share.

In the transition phase of the last 12 months, HUL’s volume growth was weak and value growth was affected by price cuts. Analysts expect a gradual recovery in volume growth in FY25, driven by own initiatives and gradual improvement in demand.

Here’s what brokerages said on HUL Q4 results and HUL share price:

Motilal Oswal

Motilal Oswal believes that Hindustan Unilever’s volume growth has bottomed out and expects a gradual volume recovery in FY25. HUL’s wide product basket and presence across price segments should help the company achieve a steady growth recovery. 

There is scope for a turnaround in part of BPC and F&R; we will monitor the execution in these segments under the new CEO. The valuation at <45x FY26E EPS is reasonable given its last five-year average P/E of 60x on one-year forward earnings, Motilal Oswal said.

Considering favorable risk-reward, the brokerage firm reiterated its ‘Buy’ rating on HUL with a target price of ₹2,900 per share, based on 55x FY26E EPS.

Also Read: Kotak Mahindra Bank share price tanks 10% as RBI action seen hurting growth, margins

Antique Stock Broking

Antique Stock Broking believes pricing is likely to remain marginally negative and topline to be driven by volume growth in the near term. The brokerage is of the view that the recovery in volume growth should be gradual as the stress in the rural market continues. Additionally, higher A&P spends, increase in royalty payment, and termination of GSK consignment can restrict margin expansion in FY25. 

Post the HUL Q4 results, the brokerage cuts estimates by 3% – 4% over FY25 – FY26. It maintained a ‘Hold’ rating and cut HUL share price target to ₹2,455 apiece from ₹2,566 earlier, based on 50x PER on FY26E EPS.

Also Read: Axis Bank share price rises 5% buoyed by healthy Q4 numbers

JM Financial

JM Financial believes with absence of pricing lever (guidance of low single digit decline in 1H & low single digit growth over 2HFY25E) and competitive intensity sustaining, margin expansion is unlikely. 

HUL share price has seen sharp correction, function of muted earnings growth in FY24E. With negatives largely known, stock’s very low return over the last three years and valuation below historical average could likely provide some support on the downside, JM Financial said.

Given the tough operating landscape, rerating will be contingent on better visibility on volume acceleration & double-digit earnings growth, it said.

JM Financial maintained a ‘Buy’ call on HUL shares and cut HUL target price to ₹2,640 per share from ₹2,970 earlier.

Nuvama Institutional Equities

HUL posted an overall in-line Q4FY24 versus Nuvama’s estimates with revenue growth of 0.4% YoY, whereas EBITDA and adjusted PAT edged down 1% and 2% YoY.

Nuvama Institutional Equities cut its  FY25 and FY26 earnings per share (EPS) estimates by 7% and 5.5%. It maintained its ‘Buy’ rating and cut HUL share price target to ₹2,885 from ₹3,105 earlier.

At 10:15 am, HUL share price was trading 1.51% lower at ₹2,225.00 apiece on the BSE.

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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 making any investment decisions.