HUL shares fall up to 4% despite in-line Q3 results; most brokerages slash target

Shares of the FMCG major Hindustan Unilever (HUL) in Thursday's session fell up to 4 per cent in early trade -emerging as the top Nifty loser as weak management commentary weighed. At around 9:35 am, the stock traded weak by over 2 per cent or Rs 48.45 at Rs 2,294.5 apiece on the NSE.

For the December quarter, HUL posted largely in-line results with standalone profit during the review quarter beating estimates on the back of Rs 509 crore exceptional gain. Analysts expect that the company's announcement beyond results may, however, lend support to the stock.

Standalone profit for the reporting quarter came in at Rs 3,001 crore as against Zee Business estimates of Rs 2,556 crore. In Q3FY24, the company's PAT was at Rs 2,519 crore. Revenue, however, lagged estimates, but recorded 1.4 per cent on-year growth to Rs 15,408 crore as against Rs 15,188 crore in the same period last year.

On the operating front, the diversified FMCG company posted Rs 3,570 crore in EBITDA versus Rs 3,540 crore in the same period of the previous year. EBITDA margin also registered a 10 basis points decline and came in at 23.2 per cent in comparison to 23.3 per cent during the corresponding period of the previous year.

The underlying volume growth also remained flattish during the review quarter as against estimates of 1 per cent growth. 

HUL's management commentary

The company's management on the sidelines of the company's Q3FY25 earnings said that it expects moderation in consumption sentiment to continue and in case the commodity prices remain steady, low-single digit price growth is expected. Further, it added that EBITDA will be likely maintained at the lower end of our range of 23-24 per cent.

How global brokerages view HUL's Q3 earnings?

Citi has continued with its 'buy' rating on the scrip but with a reduced target of Rs 2,850. Earlier, the brokerage pegged HUL's target at Rs 3,400. As per the brokerage tepid demand trends will weigh on the near term growth outlook of the FMCG company. Furthermore, the brokerage sees the acquisition of Minimalist to addres white spaces in the beauty segment. Considering the headwinds, foreign brokerage has slashed FY25-27 earnings estimates by 2-6 per cent.

Goldman Sachs, meanwhile, has continued with its 'neutral' stance on the counter with the target reduced to Rs 2,480 from Rs 2,650 per share earlier. Acording to the brokerage, the company's Q3 was below estimates on EBITDA as well as volume growth. Also, the brokerage highlighted that the company's management lowered the near-term outlook to moderating consumption environment from stable environment earlier. Also, the brokerage underlined that the urban slowdown has worsened, with downtrading to small packs underway.

Macquarie also has reiterated its previous 'Outperform' call on the stock with the target at Rs 2,800. The brokerage foresees tailwind in the beauty segment from the acquisition of Minimalist brand. Also, it added that gradual pace of recovery at the company is driving cuts on both the EPS as well as target price. Besides, the brokerage is of the view that the worst of volume weakness is likely behind us.