Hindustan Unilever declines 2% on management rejig; analysts remain bullish

Hindustan Unilever shares declined more than 2 percent in morning trade on Friday after the management rejig, but global brokerage house CLSA remained bullish on the stock.

The stock was quoting at Rs 1,697.40, down Rs 39.95, or 2.30 percent on the BSE, at 11:36 hours IST.

The FMCG major, on March 14, has elevated HUL Chairman and Managing Director Sanjiv Mehta as the President of Unilever South Asia with effect from May 1, 2019.

Mehta would also continue as the Chairman and Managing Director of Hindustan Unilever. As part of the new role, he would also become a member of the Unilever Leadership Executive (ULE).

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Unilever also announced appointment of Nitin Paranjpe, President, Foods & Refreshment, as the Chief Operating Officer.

He will be responsible for all of Unilever’s go-to-market organisations, driving and co-ordinating in-year performance across our countries in line with company’s divisional strategies.

Hanneke Faber, currently President, Europe, has been appointed as the President, Foods & Refreshment.

Kees Kruythoff, President, Home Care, has decided to leave Unilever after 27 years of service to pursue external opportunities, the company said.

Peter ter Kulve, Chief Digital Officer and EVP South East Asia & Australasia (SEAA), has been appointed President, Home Care.

While maintaining outperform call on the stock with a price target at Rs 2,010 (implying a 16 percent potential upside), CLSA said Q4FY19 is an important quarter for Indian staples to gauge consumption trends.

The research house said as input price trend remains benign and medium-term guidance on modest margin expansion stays, premium Valuations will likely sustain.

Deutsche Bank also remained positive on the stock with a buy call and price target at Rs 2,100 apiece as it expects company to report volume growth of 7.5 percent in Q4 YoY.

It expects sales/EBITDA / PAT growth of 11/15/16 percent for Q4.

“Rural growth is still higher than urban growth, but moderated to 1.2x urban growth,” it said.

Initially this week, Reliance Securities initiated coverage on Hindustan Unilever with a buy recommendation and a target price of Rs 2,000.

Looking ahead, it expects HUL to witness the fastest earnings growth among the major FMCG companies, notwithstanding the size and scale of operations.

“HUL is expected to register earnings CAGR of 23 percent over FY19-21 driven by both organic and inorganic initiatives. Acquisition of GSK Consumer’s India business provides HUL a strong foothold in the foods segment in terms of diversifying its portfolio and reducing dependence on homecare and personal care segments,” it said.

At CMP, the stock trades at a premium valuation multiple of 50x FY20E earnings, which it believes to sustain owing to strong growth visibility.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
First Published on Mar 15, 2019 12:20 pm

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