HUL shares gain as analysts maintain 'buy' recommendation, see up to 29% upside post Q2 results

Shares of Hindustan Unilever (HUL) opened higher on Thursday, October 29, as global investment banking firms are positive on the stock post its second quarter earnings a day prior.

Both Jefferies and Nomura have "buy" ratings on the HUL stock and see up to 29% upside on it.

Jefferies

Jefferies has a "buy" rating with a target price of ₹2,350 per share. This indicates an upside of 29.4% from its previous closing price.

It said the company's second quarter growth was the strongest in several quarters, though off a low base (GST transition).

Inflationary pressures led to sharp gross margin (GM) contraction, however, product price hikes, advertising and promotion (A&P) cuts, operational leverage restricted its EBITDA pressures, the global investment banking firm said.

It added that the company calibrated pricing growth, which protected its volumes.

It said inflationary pressures are likely to persist in the short term, but the management sounded positive on demand.

It found the parent's comments on the call more cautious.

Nomura

Nomura has a "buy" rating and a target price of ₹2,100 per share on the HUL stock. This indicates an upside of 15.7% from its previous closing price.

Noting the quarter to be "just another brick in the wall", it said the company's second quarter consolidated volume and sales growth of 7% and 15% from last year were above estimates of 5% and 11%, respectively.

It said the gross profit margin (GPM) compression was much above expectation, while its operating margin was at 22.4% compared to Street estimates of 23%.

Nomura said HUL's volumes are optically better on a flat base and sharp pricing lifted its sales but could pressure volumes.

Stock reaction

Of the 42 analysts who have coverage on the HUL stock, 30 have "buy" ratings, nine have "hold" ratings and three have "sell" ratings.

HUL shares ended the previous session 0.1% lower at ₹1,815.8 apiece. The stock has declined 2.6% in the past month and is down 21.8% this year, so far.

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