Should you buy, sell or hold HUL shares after FMCG majors Q1 show falls short of Street expectations?

Hindustan Unilever Ltd (HUL) shares fell on Friday, a day after the FMCG major reported worse-than-expected results for the April-June period. HUL shares dropped by as much as Rs 63.8 or 2.4 per cent to Rs 2,638.6 apiece on BSE in early deals. 

HUL Q1 results: A summary

After market hours on Thursday, HUL reported an eight per cent rise in net profit to Rs 2,472 crore for the quarter ended June 2023 compared with the corresponding period a year ago. Its revenue increased 6.1 per cent on a year-on-year basis to Rs 15,148 crore, according to a regulatory filing. 

According to Zee Business research, HUL's quarterly net profit was estimated at Rs 2,596 crore and revenue at Rs 15,445 crore.  

HUL — whose popular brands include Red Label, Surf Excel, Rin, Horlicks, Dove, Bru and Boost — reported 8.4 per cent growth in earnings before interest, taxes, depreciation and ammortisation (EBITDA) to Rs 3,521 crore, as against Zee Business analysts' estimate of Rs 3,620 crore.

Its margin — a key measure of profitability — improved by 40 basis points on a year-on-year basis to 23.2 per cent, but fell 20 basis points short of the analysts' estimate.

EDITOR'S TAKE | Volume growth disappointing though commentary positive

Zee Business Managing Editor Anil Singhvi highlighted that the FMCG major disappointed the Street on the revenue, operating profit as well as margin fronts. He said that HUL's volume growth for the quarter was disappointing though the management delivered a positive commentary.  

What brokerages say

Jefferies double-downgraded Hindustan Unilever to 'hold' from 'buy' and reduced its target price for the stock by Rs 105 to Rs 2,770 after the earnings announcement. 

The brokerage gave a cautious outlook on HUL saying that a recovery will take time due to macroeconomic headwinds and a gradual pickup in volume growth, and reduced its earnings per share (EPS) estimate for the company by 1-3 per cent.  

Hindustan Unilever shares finished the June quarter with a gain of 4.7 per cent, underperforming a 10.5 per cent rise in the benchmark Nifty index.

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