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The stock of Hindustan Unilever has been hogging the limelight both on the price and volume fronts, as brokerages upgraded the stock. The stock outperformed both the BSE FMCG Index and the BSE Sensex in September. While the Hindustan Unilever stock delivered a return of 10 per cent during the period, the Sensex fell 0.66 per cent and the BSE FMCG index remained flat.
The stock today registered its 52-week high at Rs 354 but closed a shade lower at Rs 352.60, a gain of 3.34 per cent over the previous day's close.
Analysts said price hike, new products, easing raw material costs and a pick-up in monsoon revived hopes for the FMCG sector. Besides, defensive bet at the time of global uncertainty also attracted investors towards the sector.
Mr Mohan Swamy, Analyst, RBS, wrote in his recent research: “With raw material prices stabilising, and the full impact of calibrated price hikes taken in the last 2 quarters, we believe HUVR would show y-o-y margin expansion after 7 quarters of declines. Management is focused on sustaining volume growth and our channel checks reveal 7-8 per cent growth in Q2 of FY12 as well.”
“The FMCG companies have been able to pass on some of the rise in costs to the consumer. It is commendable to see that even after a series of price hikes throughout past 12 months, the consumer demand has remained strong and most companies have recorded high volume growth as the demand for FMCG products is relatively price inelastic,” said a research report from Dhanlaxmi Bank on FMCB sector.
“Our recent meeting with company's management reinforced our positive stance on the company, which continues to see strong business traction. We expect its healthy top line growth to continue (13-15 per cent CAGR) led by higher volumes (7-9 per cent CAGR). Margins have bottomed out and should improve gradually, aided by flattening input prices, control over A&P spends and an improving product mix,” said a note from Religare.
Margin improvement
“We expect margins to improve marginally in the coming quarters driven by improving product mix, softening in prices of some key inputs, price increases in soaps and detergents and operating leverage-related benefits,” said a research report from Standard Chartered.
Hindustan Unilever reported a 17.62-per cent increase in net profit at Rs 627.18 crore (Rs 533.21 crore) for the quarter ended June 30. During the period, the company's net sales jumped by 14.8 per cent to Rs 5,503.89 crore from Rs 4,793.89 crore in the corresponding quarter last fiscal. This includes exceptional items including the sale of property worth Rs 50.99 crore.
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