Hindustan Unilever top Sensex loser, tanks 4% post Q1 results

Hindustan Unilever share price tanked over 4 per cent on Tuesday even as the FMCG major reported a 19.17 per cent increase in standalone net profit at Rs 1,529 crore for the June quarter, led by strong volume growth and sustained margin improvements. The company had posted a net profit of Rs 1,283 crore in the April-June quarter a year-ago.

Experts believe HUL may have reported profits, but the company missed street estimates as cost of materials climbed 16 per cent. 

The stock slipped as much as 4.5 per cent to hit intraday low of Rs 1675.30. The stock settled at Rs 1683.75, down 4 per cent and was the top Sensex loser.

The scrip had hit an all-time high of Rs 1,780 in early trading, but pared all gains to trade lower through the day. 

"HUL delivered a steady Q1, helped by a low base, but volume growth trajectory is likely to taper down as base normalises and overall demand pickup remains modest, global brokerage Jefferies said in a results review report, downgrading the stock to 'hold' from 'buy'. The brokerage maintained target price of Rs 1,680.

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"Given additional headwinds of rising input prices and competitive pressures, it would be difficult for co to maintain pace of margin expansion," Jefferies said. 

Morgan Stanley retained “underweight” on stock with a target price of Rs 1,260, saying global consumer companies like HUL are likely to face higher risk of a disruption from smaller, more agile companies nibbling at incumbents’ market share.

Kotak Institutional Equities believes consistency of performance is impressive, but sustaining these levels of growth would need acceleration in market volume growth from current 5-6 per cent levels.