HUL sees profit booking after Q1FY25 results beat estimates; down 3%

HUL in focus post Q1 results: Shares of Hindustan Unilever, India’s largest fast-moving consumer goods (FMCG) company, witnessed profit booking on Thursday, following June quarter (Q1FY25) results, which surpassed street estimates. 

On the bourses, at 10:16 AM, HUL stocks were trading 1.57 per cent lower at Rs 2,723. In comparison, BSE Sensex was trading 0.08 per cent lower at 8,363.44 levels. 

Analysts said HUL is already at a 52-week high and has seen a sharp up move in the past two months. Thus, they believe that some profit booking in the near term is possible given results are in line with consensus.

 

Furthermore, a favourable Union Budget for rural consumption has already been announced. Hence, analysts noted, some selling could be there as it could have already been factored in.

How are brokerages interpreting HUL's performance in Q1?

Domestic brokerage Nuvama, in a note said, with improvements in gross margin (GM), it took price cuts to pass on the benefits. Thus, analysts reckon HUL shall win market share in personal wash given its recent disruption in soaps. 

“We are near the exit of an adverse cycle of sharp inflation followed by steep deflation, auguring well for HUL from a market share gains perspective. We are raising FY26E EPS by 2 per cent, along with a roll forward to Q1FY27E, yielding target price of Rs 3,375 (earlier Rs 2,885); maintain ‘Buy’,” Nuvama said.

Meanwhile, those at Emkay said that they remain positive on HUL, on hopes of better execution by the new leadership. Rebound in rural areas would be crucial, and will help drive growth in HUL’s mass-end portfolio, which remains under pressure, analysts said.

“Near-term performance is likely to stay muted, but will see gradual improvement (8 per cent sales CAGR in FY24- 27E). Focus on topline will limit margin recovery – we build-in 120 bps margin recovery over the next 3 years. Q1 results are broadly in-line, with better volume growth – at 4 per cent. On enhanced execution, we lift target valuation multiple, from 55x to 58x (now at ~5 per cent premium to the historical average forward P/E). We maintain ‘Buy’ on HUL, with a new Jun-25E TP of Rs 3,100/sh (Rs 2,900 earlier),” Emkay said in a note.

That said, following the Q1FY25 results of HUL, several global brokerages have upped the target prices. For instance, Investec has maintained a ‘Buy’ rating on the company and raised its target price to Rs 2797 per share. Citi also maintained a Buy rating, with its target price increased to Rs 3150 per share. Nomura, while also maintaining a Buy recommendation, raised its target price significantly to Rs 3200 per share.

Contrastingly, Morgan Stanley maintained an Underweight rating on the company and set a target price of Rs 1876 per share.

Financial performance 

Hindustan Unilever (HUL) consolidated profit rose 2.2 per cent year-on-year (Y-o-Y) to Rs 2,610 crore in Q1FY25 while its underlying volume growth stood at 4 per cent in the same period. The FMCG major’s revenue rose 1.4 per cent year-on-year (Y-o-Y) to Rs 15,707 crore. 

“HUL’s first quarter performance reflects our decisive actions of transforming our portfolio in high growth spaces aided by gradual recovery of rural markets. Our commitment to unlocking access to aspiration, market making & premiumization supported by our distinctive capabilities is a key driver of our competitive edge. With our strong brands, execution prowess and distribution might, HUL is well positioned to leverage this growth opportunity as we continue transforming our business to outperform,” said Rohit Jawa, CEO and Managing Director, HUL.

Outlook

The company noted a gradual improvement in FMCG and rural demand. Excluding the one-time indirect tax impact from the base scenario, with commodity prices stable, the company anticipates near-zero price growth, while aiming to maintain current Ebitda margins.

“We continue to focus on driving competitive volume growth, generating fuel to invest behind our brands and making our business future fit. We remain confident of the medium to long term potential of the Indian FMCG sector,” Jawa added.