Shares of Hindustan Unilever (HUL) were trading higher for the seventh straight day, up 2 per cent at Rs 2,108 on the BSE on Thursday, after the company reported better-than-expected September quarter (Q2FY20) results.
The stock of fast moving consumer goods (FMCG) company surpassed its previous high of Rs 2,102 touched on September 23, 2019. In the past eight days, it has rallied 12 per cent, as compared to a 3 per cent rise in the S&P BSE Sensex.
HUL’s net profit grew 21 per cent at Rs 1,840 crore, while sales revenue rose 6 per cent at Rs 9,708 crore relative to the corresponding quarter of the previous fiscal. EBITDA (earnings before interest, tax, depreciation and amortization) margin, too, expanded 293 bps year on year to 24.8 per cent in Q2FY20. Benign input cost, improved product-mix, cost saving initiatives, lower employee cost and higher operating leverage contributed to better operating performance despite higher advertising expenses, the company's financial statement showed.
“The company took measures such as price cuts (soaps/detergents), passed on the benefits of lower palm oil prices to consumers to keep volumes intact, took cost savings initiatives and also benefitted from an overall benign commodity price environment. The fall in crude prices and other cost cutting initiatives undertaken by the company will lead to further EBITDA margin expansion to around 25 per cent by FY21,” analysts at KR Choksey Shares and Securities said in a result's update. The brokerage firm has assigned ‘accumulate’ rating on the stock with target price of Rs 2,203 per share.
Furthermore, analysts at Reliance Securities believe even with a likely pick-up in rural volume, the organic nominal growth will decline as the company will pass on the benefit of lower input cost to the consumers. With decrease in nominal growth rate, its earnings growth trajectory is unlikely to sustain at the current elevated levels, it added.