HUL share price falls 3% despite net profit growth; should you buy or sell? Check what brokerages say

Due to disappointment on the margin front, muted absolute growth trajectory and unfavourable risk-reward, HDFC Securities has maintained a ‘reduce’ rating

Hindustan Unilever (HUL) share price fell 3.4 per cent to Rs 2,241, after hitting a day’s high of Rs 2,340 apiece on BSE, despite a 7 per cent on-year growth in its standalone net profit at Rs 1,881 crore in the April-June quarter. The company had reported a net profit of Rs 1,755 crore in the corresponding quarter last year. Brokerage firms have mixed views on HUL stock, with some predicting an upside of 10 per cent while others seeing a downside of 13 per cent. “The outlook is gradually improving, with the discretionary part of the portfolio (15% of sales) gradually seeing recovery. In a period of relative normalcy, HUVR (as has been the case in recent years) is likely to report superior earnings growth,” Motilal Oswal Financial Services said in its latest report. 

The FMCG giant, Hindustan Unilever also declared an interim (special) dividend of Rs 9.50 per share for the financial year ended March 31, of the face value of Re 1 each resulting in total dividend payout to Rs 2,232 crore. On the back of robust earnings growth potential and significant synergies in FY22E as a result of GlaxoSmithKline Consumer Healthcare (GSKCH), the brokerage firm is positive on HUL with a price target of Rs 2,550, an upside of 10 per cent.

Owing to a good performance in home care segment, food and refreshment segment, and double-digit growth in beauty and personal care segment, BofA Securities reiterated ‘buy’ rating to the stock with a target of Rs 2,520 apiece. According to HUVR, green shoots are visible in rural areas, but it would like to wait for a couple of quarters before making any comment on the sustainability of this growth, BofA Securities said.

Due to disappointment on the margin front, muted absolute growth trajectory and unfavourable risk-reward, HDFC Securities has maintained a ‘reduce’ rating with a downside of 13 per cent. “The company saw sequential improvement in demand in May and June, but overall sentiment remains weak on account of job losses and return of lockdowns in several states. The discretionary and Out-Of-Home (OOH) categories are expected to remain weak in FY21,” it said. 

Emkay Global Financial Services recommended to hold the HUL stock with just a per cent of upside. “Our estimates now include GSK and we factor in sales recovery for the base business from Q2 but moderate our margin assumptions marginally. We await further commentary on GSK but the lack of earnings triggers restricted upsides,” the brokerage firm said.