Hindustan Unilever slips 3% post Q1 results on profit booking

Shares of Hindustan Unilever (HUL) have slipped 3% to Rs 1,701 per share on the BSE on Tuesday due to profit booking after the fast moving consumer goods (FMCG) company reported strong numbers for June 2018 quarter (Q1FY19), broadly in-line with analyst estimates.

The stock has fallen 4.4% from its all-time high of Rs 1,780 recorded in early morning trade on BSE today. The S&P BSE Sensex was trading 0.17% higher at 36,384 points at 10:09 am.

In calendar year 2018, HUL had outperformed the market by surging 28% as compared to 7% rise in the benchmark index till Monday. In past one year, it had rallied 54% against 13.4% gain in the Sensex.

HUL Q1FY19 performance was in line with expectations though the growth in domestic consumer sales volumes at 12% was better than expectations. During the quarter, reported revenue grew at 11%YoY at Rs 95 billion. EBIDTA and net profit grew at a higher rate of 21% YoY and 19% YoY respectively to Rs 22.5 billion and Rs 15.7 billion, respectively.

“HUL will continue to post strong growth in earnings backed by healthy volume growth and profit margin expansion. However we believe that majority of the positives are already factored in our EPS CAGR of 24% for FY18-20E,” analysts at Antique Stock Broking said in result review.

We maintain our target price (TP) of Rs 1,649 based on PER multiple of 45x. We don't see any case for further re-rating from the current levels and hence downgrade the stock to HOLD, primarily in view of fair valuations, it added.

“Post the sharp appreciation, valuation at 50xFY20E EPS price in most positives and immediate upside looks unlikely. However, HUL still looks a good long-term bet as it offers faster growth v/s peers, high earnings visibility and has levers to provide more positive surprises in future. We maintain ACCUMULATE with revised TP of Rs 1,750,” Emkay Global Financial Services said in result update.

“ Although the management sounded a note of caution on rising inflation (largely crude-led) we are confident of HUL’s ability to navigate it and deliver modest margin expansion through its time-tested strategy of playing its portfolio and all lines of P&L. However, post the sharp run-up in the stock (+52% in the last 12 months), we believe the positives have been priced in, and current valuations, at 53x FY20 earnings, appear rich. We maintain HOLD with a revised TP of Rs 1,700,” analyst at SBICAP Securities said in result review.