Hindustan Unilever and ITC both are out with their March quarter results, and their respective stocks have reacted to their earnings. The effect has been more positive for HUL than ITC as the former is inching closer to the market capitalisation of latter to become the fourth largest company on Dalal Street. 

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Just last month, HUL entered the top five club, beating HDFC and Maruti Suzuki. It now looks set to overtake ITC too.  

At current market price of Rs 1588.40, HUL quoted at market value of Rs 3,43,402.49 crore, which is just Rs 2833 crore away from ITC's market cap of Rs 3,46,235.85 crore at the stock price of Rs 283.95. The top three most valuable companies are TCS (Rs 669148.80 crore), Reliance Industries (Rs 605956.31 crore) and HDFC Bank (Rs 525744.74 crore).    

HUL share price has rallied 58 per cent in the last one year, while ITC share price has remained flat. 

HUL reported 14.2 per cent increase in its standalone net profit to Rs 1,351 crore for the fourth quarter ended March 31, mainly on the back of volume growth. The company had posted a net profit of Rs 1,183 crore in January-March period a year ago. HUL's net sales during the quarter under review stood at Rs 9,003 crore, up 2.62 per cent, as against Rs 8,773 crore in the corresponding period of the last fiscal. 

Meanwhile, ITC reported a 9.86 per cent increase in standalone net profit at Rs 2,932.71 crore for the fourth quarter ended March 31, 2018. The company had posted a net profit of Rs 2,669.47 crore in the January-March period a year ago. ITC's net sales during the quarter under review stood at Rs 10,705.75 crore. It was at Rs 14,882.75 crore in the corresponding period of the last fiscal year.

HDFC Securities believes HUL's earnings growth will sustain driven by recovery in rural demand, premiumisation, new product launches, strong pricing power (pass on inflation) and strong brand investments. "We upgrade our multiple to 45x (43x earlier) P/E on Mar-20EPS to arrive at a target price of Rs 1,615. We re-iterate BUY," said HDFC Securities in a results review report. 

However, Motilal Oswal Securities has a neutral rating on ITC with a target price of Rs 1,615. 

"While the gloom is ebbing, we expect the improvement to be gradual. We estimate moderate 12-13% earnings growth in the medium term. Possible increase in GST rates in the subsequent GST Council meetings remains an overhang. If ad valorem duty is increased, it would sour the investment case further," said MOSL. 

ITC is trading at a discount to Indian FMCG peers at 28.6x FY19E and 25.2x FY20E EPS, but it is at a premium to global cigarette majors, noted MOSL. "

"Due to the uncertain outlook around cigarette earnings, which account for 86 per cent of EBIT, we maintain Neutral with target price of Rs 295," it added.