With A Target Price of Rs. 2,565 Here’s Why Axis Securities Is Bullish On India’s Largest FMCG Stock

Axis Securities Ltd, a renowned Indian brokerage firm, has advised investors to buy the shares of Hindustan Unilever Limited. The brokerage has set a target price of Rs. 2,565 for the stock to reach in 6-9 months from its market price of Rs. 2,332 resulting in a 10 percent surge. HUL is Indias largest fast-moving consumer goods business, with 44 brands covering 14 categories including soaps, detergents, shampoos, skincare, toothpaste, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers. Lux, Lifebuoy, Surf surf, Rin, Wheel, Glow Lovely, Ponds, Vaseline, Lakm eacute;, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Walls, and Pureit are among the major household brands of the company. As per the brokerage HUVRs products are spread across the discretionary (beauty and personal care) and nondiscretionary segments comprising of health, hygiene and nutrition products. With the opening up of the economy and aggressive vaccination drive across the nation, the BPC segment has seen a steady improvement with growth reaching near pre-covid levels. We also think even if there is uncertainty on new covid variants the company is well placed to grow be it in the discretionary or non-discretionary portfolio. The BPC segment witnessed a broad-based performance across all categories and the growth momentum is expected to continue driven by WIMI strategy. In its latest report Axis Securities has added that Foods business continued to witness growth as HFD volumes grew in double digits led by distribution penetration and continued in-home consumption trend and growth to led by tea where HUVR strengthened its market leadership despite inflationary headwinds. Nutrition business (GSK-CH) is expected to post healthy growth as business returned to normalcy post supply chain disruption and also improved in-mobility and improving out-of-home consumption. The report further stated that HUVRs Go to market integration is now above 85% completion levels in Q2FY22 as against 50% in Q1FY22. This has led to 1.9x effective coverage vs pre GTM integration levels. This has led in increased penetration sequentially and helped in double-digit growth in the HFD portfolio besides new product launches that are supporting penetration and share gains.Advertisement The reason behind being bullish by the brokerage is that HUVR has taken price increases to offset raw material inflation the impact on persistent inflation on margins could be limited in our view and the company would maintain the guided margin band of 24-25% for FY22E. While volumes could come under pressure in the near term given the impact of price increases (as noted in the past) HUVR is well placed to capitalize on the growth and strengthen its market share across various categories that it operates in. We remain believers of HUVRs growth story from a medium-term perspective as, HUVR has the right growth matrix like a broad-based portfolio across the e-value matrix, continued cost savings agenda, growing traction in GSK-CH business, and execution prowess. Given the volatile market outlook and relatively stable earnings growth trajectory, we believe HUVR could perform over the medium to long term. Maintain BUY with a TP of Rs 2,565. The stock has been picked from the brokerage report of Axis Securities Limited. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.