HUL Stock Braves Today's Market Fall, Extends Gain for Fourth Day; Should you Invest?

Shares of the FMCG giant Hindustan Unilever (HUL) have extended gains for the fourth consecutive day on Thursday, gaining over 1.5 per cent even as benchmark indices the 30-pack Sensex and the broader Nifty declined almost a per cent each.

Marico(up 2.51 per cent), Varun Beverages(up 2.01 per cent), Prataap Snacks(up 1.67 per cent), ADF Foods(up 1.64 per cent), Hindustan Unilever(up 1.41 per cent), Dodla Dairy(up 1.28 per cent), Jyothy Labs(up 1.06 per cent), Heritage Foods(up 0.92 per cent), Gillette India(up 0.89 per cent) and Dabur India(up 0.86 per cent) were among the top gainers.

Future Consumer(down 73.05 per cent), Dangee Dums(down 2.54 per cent), Nakoda Group(down 1.96 per cent), Euro India Fresh Foods(down 1.96 per cent), TATA CONSUMER PRODUCTS(down 1.48 per cent), Godrej Consumer Products(down 1.26 per cent), Umang Dairies(down 0.99 per cent), Colgate Palmolive(India)(down 0.71 per cent), Bajaj Consumer(down 0.59 per cent) and Zydus Wellness(down 0.57 per cent) were among the top losers.

Ahead of the festive season, FMCG companies are seeing a rally. They are betting big on the festival season by ramping up supply chains, investing in marketing campaigns and lining up new packs. Managements are also expecting rural demand to make a robust comeback.

Also, in the past few months, prices of major commodities such as palm oil, packaging material and crude oil have eased. Prices of palm oil, one of the most widely used commodities in the FMCG industry, have declined by over 46% from its April peak.

Market experts believe that the cumulative impact of price hikes and falling commodity prices will start benefiting the FMCG stocks in the upcoming quarters.

Should you Buy, Sell or Hold?

Analysts at Sharekhan like the stock for its leadership position in 80 percent of the portfolio. “Along with that, improving growth outlook and a healthy balance sheet with consistent cash flows makes it a best pick in FMCG space,” according to the brokerage firm. It has a “buy” rating with a target price of Rs 2,850.

Macquarie maintained outperform rating on Hindustan Unilever with a target price of Rs 3000 which translates into an upside of 16 per cent from Rs 2582 recorded on September 20.

Channel checks suggest steady demand. The global investment bank expects 16 per cent sales growth; high-cost inventory to impact EBITDA.

“The demand strength should sustain volume growth momentum. Downside risks to margins are limited,” said the note.

ICICI Securities has added a call on Hindustan Unilever with a target price of Rs 2,750. The current market price of Hindustan Unilever is Rs 2,525. The time period given by the analyst is one year when Hindustan Unilever Ltd. can reach the defined target.

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