HUL stock hits 52-week high in a weak market amid demand recovery hopes

The management believes the outlook from June'21 onwards is positive, subject to the emergence of a third Covid-19 wave

Shares of Hindustan Unilever hit a fresh 52-week high of Rs 2,522.25, up nearly 2 per cent on the BSE, in intra-day trade on Monday after the management said the outlook from June’21 onwards is likely to stay positive, barring the emergence of a third Covid-19 wave.

The stock of the fast moving consumer goods (FMCG) giant, which was trading higher for the fifth straight day, surpassed its previous high of Rs 2,504.30, touched on April 13, 2021. It had hit a record high of Rs 2,614 on April 8, 2020. In the past one week, it has gained 6 per cent as compared to a per cent decline in the S&P BSE Sensex.

India witnessed a second wave of Covid and went under a state-wise lockdown for a couple of months. However, with faster recovery and drastic fall in positive cased, India is unlocking gradually. Hence, analysts expect categories like packaged food, health and hygiene and some discretionary categories like cosmetics, skin care, etc to witness acceleration in demand in H1FY22E.

"With various parts of India progressively opening up, the management of Hindustan Unilever believes the impact from the second Covid wave would have peaked in May’21 and things will progressively get better. The increase in store operating hours is also a positive development," analysts at Motilal Oswal Financial Services said in a report after interacting with the management of the company for an update on overall market conditions.

It added: Rural continues to do better than urban, despite experiencing a higher impact from the pandemic in 1QFY22 relative to last year. Prediction of a normal monsoon, good Rabi harvest, favorably timed Kharif sowing, and MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) provide prospective support as well.

In January-March quarter (Q4FY21), Hindustan Unilever delivered decent numbers, both, on the volume and profitability front amidst headwinds on margins slump in discretionary consumption. The company took price increases in Skin Cleansing in Q3FY21 and Q4FY21 and would take increases going forward as well. The company has also taken price increases in Tea and reversed the earlier price cuts in Detergents.

“In the GlaxoSmithKline Consumer Healthcare business, penetration and volume growth are the key focus areas; the company delivered volume growth in the high teens, with underlying volume growth (which includes the mix) in the early double digits. The company’s earnings growth has gained further momentum in recent years before COVID-19 (an ~18 per cent EPS CAGR in the four years ended FY20 v/s a ~12 per cent CAGR over the 10 years ended FY20),” analysts at KRChoksey Shares and Securities said in Q4FY21 result update.