Hindustan Unilever shares may react to a subdued Q2 business update

Shares of Hindustan Unilever Ltd

., India's largest FMCG company, will be in focus on Monday, September 29, after the company released a subdued update for the ongoing quarter after market closing hours on Friday.

HUL, in its exchange filing, stated that it expects the consolidate business growth for the September quarter will be flat to low-single-digits on a year-on-year basis.

It attributed this update to the transitory impact due to the trade and channel disruption on account of the GST rate rationalisation, which was announced earlier this month.

The new GST rates, which cut down prices of multiple essential goods, including FMCG items, took effect on September 22.

HUL anticipates this impact to continue in the month of October as well, which will be the first month of the third quarter of the current financial year. A recovery, according to HUL, will happen starting November.

Morgan Stanley in its note maintained its "equalweight" rating on HUL with a price target of ₹2,335. It said that the commentary from HUL is below market expectations. It said that consumers have delayed their pantry buying which will impact September sales and the impact will continue in October as well, due to the existing inventory.

On the other hand, Jefferies maintained its "buy" recommendation on HUL with a price target of ₹3,000. The brokerage stated that although GST cuts are positive for demand, the transitory impact has hurt September offtake.

Jefferies added that it expects the impact to be similar for other FMCG companies in the September quarter.

44 analysts have coverage on HUL, of which 33 have a "buy" rating, nine say "hold", while two have a "sell" recommendation.

Shares of Hindustan Unilever ended 1% lower on Friday at ₹2,512. The stock is down 5.5% in the last one month.