Hindustan Unilever Limited (HUL) shares rebounded 4% on Wednesday, July 29, recovering from the previous day's 7% decline following June quarter earnings. The stock hit the day's high of ₹2,105.05, up 4.04% over the last closing price of ₹2,023.15. The recovery came as brokerages reiterated their bullish views on the counter, with steady volume growth and stable outlook driving their positive stance. Brokerage targets signal an 18-24% upside from last close, with the recent correction suggesting that downside risks are limited. At 09:18 am, the Sensex was up 729 points, or nearly 1% at 77,495, while the Nifty 50 gained 204 points to 24,190.
HUL's June quarter results were mixed, with consolidated net profit declining 3% year-on-year to ₹2,673 crore, following a one-off tax credit during the quarter. However, revenue rose 10% to ₹17,341 crore, ahead of the Bloomberg estimate of ₹17,571 crore, but below Street expectations. EBITDA rose 8.4% to ₹3,947 crore, while the EBITDA margin narrowed to 22.8% from 23.1% a year earlier. Underlying volume growth came in at 5%, below Street expectations of 6% to 8%, contributing to the sharp decline in the stock after the results. Gross margin contracted 79 bps Y-o-Y to 49.5% given elevated input cost, though the company maintained its growth and margin guidance despite continued volatility in commodity prices. Management acknowledged that raw material inflation is likely to stay volatile, with cost pressure of 2 to 5% expected quarter on quarter heading into September.
Despite the overall volume disappointment, HUL delivered impressive performance across key business segments during Q1. Home Care led the performance with 14% revenue growth to ₹6,554 crore and 1% EBIT growth to ₹1,137 crore, marking its strongest growth in three years. Beauty & Wellbeing also posted double-digit growth of 12%, driven by premium skincare and haircare. Personal Care revenue grew 3% to ₹2,624 crore with EBIT increasing 9% to ₹517 crore. The company reported underlying sales growth (USG) of 10%, with volume growth and pricing contributing equally, marking HUL's strongest quarterly growth in the last 13 quarters. Management said demand remained stable across urban and rural markets despite inflationary pressures, with the company maintaining its growth and margin guidance. The foods segment reported healthy sales growth of 7% aided by mid-single digit volume growth, with lifestyle nutrition sustaining double-digit growth and Boost crossing the ₹1,000-crore mark in turnover.
JM Financial upgraded HUL stock to 'Buy' from 'Add' following the quarterly results, citing resilient margin delivery despite inflation pressures and unchanged guidance on demand and margin trends. "We believe initiatives led by the new CEO – sharper portfolio interventions, investment behind categories and intensified omni-channel execution – are in the right direction, and benefits are visible from acceleration in sales growth over the past few quarters," JM Financial said. The brokerage revised its target price to ₹2,425 (45x Jun'28E) from ₹2,435 earlier, while noting that inflationary scenario augurs well for HUL as it accelerates share gains from unorganised and regional players, and has adequate levers to navigate the current volatile environment. Elara Capital reiterated its 'Accumulate' rating with a lower target price of ₹2,390, having lowered margin estimates by 37 bps and 59 bps for FY27 and FY28 respectively amid higher input costs. Motilal Oswal Financial Services (MOFSL) reiterated its 'Buy' rating with a target price of ₹2,500, highlighting the company's 'Unified India' strategy to streamline organizational structure and accelerate decision-making. The company announced ₹20 billion of capex toward premium and high growth categories and remains optimistic about delivering better performance in FY27 vs FY26.
Jefferies noted that while HUL's Q1 performance came in slightly below expectations, the sharp 7% decline in the share price appeared disproportionate to the extent of the miss. The analysts highlighted that although there were a few areas of weakness, particularly in home care margins and growth across personal care and food segments, these were largely offset by other factors, resulting in only a modest shortfall at the EBITDA level. Goldman Sachs highlighted that HUL's revenue growth is showing signs of improvement, with expectations of further acceleration through FY27, noting that the home care segment delivered strong growth and is likely to gain additional momentum as price-led growth comes into play over FY27. Macquarie analysts described HUL's Q1 performance as broadly in line with expectations, although volume growth moderated on a sequential basis, flagging continued weakness in the soaps segment due to ongoing inflationary pressures. Morgan Stanley described HUL's Q1 FY27 commentary as optimistic, with overall demand conditions expected to remain stable, noting that inflation has not impacted demand so far with both rural and urban demand trends holding steady during the period.
