Price forecast for HUL stock set by Nomura India at Rs. 3,175 per share as of the end of December 2022 was reduced to Rs. 3,125 in January and then to Rs. 3,025 in April of this year. In a short note on June 6, it kept that goal.
If Nomura India’s June 6 price target is accurate, Hindustan Unilever (HUL) shares, which reached an all-time high of Rs 2,859.10 in September 2021, could go above Rs 3,000. The foreign brokerage thinks that the FMCG stock is worth Rs 3,025 because it is worth 55 times the stock’s earnings per share (EPS) in March 2025. This is about the same as the stock’s average market multiple over the past five years.
Nomura India had a goal for the stock of Rs 3,175 by the end of December 2022, but it cut that to Rs 3,125 in January and Rs 3,025 in April of this year. It kept this goal in a short note on June 6 and said that growth and margins were slowly getting better.
As HUL is anticipated to carry some high-cost finished goods inventories, it was said that the entire benefits of deflationary input costs would be completely realised over the following two quarters.
For the June quarter, the firm expected sales to grow by 9%, Ebitda to grow by 11%, and adjusted profit to grow by 12% year over year. It thinks that the operating profit margin (OPM) for Q1 will be 23.9%, which is up 30 basis points year over year.
It said that OPM growth will be restricted because HUL will keep spending money on advertising and building up its brand to protect itself from more competition from unorganised players in a market where input costs are falling.
Nomura said that growth in urban markets should stay faster than growth in rural markets in the June quarter. Even though rural market demand is getting better, it is still not out of the woods, and the rate of recovery is slow, Nomura said, adding that the full benefit of the harvest money hasn’t yet been seen in customer demand for products.
“Sequential improvement in industry demand is continuing in 1Q24F, even though the rate of recovery is slow. The amount of the industry grew by about 3–4% year over year in April, whereas year over year growth was flat in 4Q23. We anticipate a 5% YoY increase in volume for 1Q24F,” the statement read.
Nomura said that there were no big price hikes in the June quarter. It expects growth that is driven by prices to slow down sharply. Hindustan Unilever has cut prices on some of its cleaning products in the June quarter because input costs are going down.
Its soaps portfolio received significant price reductions in the March quarter, and some carryover price reductions appeared in the June quarter as well. Because milk prices are going up, the prices of health food drinks (HFD) will go up in the June quarter. Estimated price increase for the June quarter: 4% YoY (down from 7% YoY in the fourth quarter of 23),” the statement read.