Analysts view on HUL Q2 results

Post Q2 results, ICICI Securities maintained ‘Add’ rating on HUL shares with a price target of ₹2,800, an upside potential of 10% from the current market price. While JM Financial retained ‘Buy’ rating with a 12-month price target of ₹2,880 per share, Prabhudas Lilladher maintained a ‘Hold’ rating with price target of ₹2,786 apiece.

According to ICICI Securities, UVG (underlying volume growth) of 2% was below its estimates. Gross margin expanded by 690 bps YoY to 52.7% as raw material cost pressure continued to decline meaningfully for most of the commodities except milk, coffee, and barley.

“Volume growth recovery was below expectations due to subdued rural performance and increased competitive intensity from small players in select categories,” it says in its report.

JM Financial in its report says that HUL’s Q2 earnings were in line with expectations, but volume growth of 2% was a further step-down versus earlier levels. Rural recovery remained gradual with market volumes still lower as compared to two year ago levels. “The hope for a gradual volume recovery in rural areas remains, given reversal of inflation, higher infrastructure spends by government, and expectation of tailwinds from a good festive season. On the other hand, the consequence of a weaker monsoon and the volatility in crude-oil prices are the key watch-outs at this stage.”

“We expect HUL’s stock to be under some pressure on the back of the weak Sep-Q report, and absence of clear volume-trigger at this juncture,” it adds.

Meanwhile, Prabhudas Lilladher has cut earnings per share (EPS) by 0.9% and 2.1% for FY24 and FY25, respectively, citing sustained pressure on volumes; lower pricing element to support growth & ward off competition from local/regional players; and marginally higher tax rates.

“Rural volumes continue to improve (on low base) supported by easing inflation, higher job participation & govt thrust towards capex. While long term growth story led by lower penetration and superior value proposition remains intact, near term growth challenges seems likely,” it says in a report.

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Analysts on HUL Q2

HUL shares fall 2% as Q2 earnings fail to impress investors