Hindustan Unilever- to Buy or to Sell?

The demonetization drive could prove to be the proverbial last straw that broke the camel’s back for some FMCG companies as the sector has been wrestling with subdued consumer demand since the past several quarters.

The FMCG bellwether, Hindustan Unilever, is likely to bear the impact of the government’s clampdown on black money that has affected rupee liquidity across the country.  This entails continued slowdown for Hindustan Unilever. The company’s volume growth slipped by 1 per cent in the September quarter and is unlikely to post a strong upturn in the next two-quarters.  While the medium- to long-term consumption growth story remains hopeful, the performance of consumption-driven businesses does look restrained in the immediate quarters.

The HUL share price is floating at around the same level as it did in December 2014. While it has corrected 19 per cent from its record high of Rs. 954 hit in September. Nevertheless, the stock is trading at 39 times its FY17 earnings on account of the high quality of earnings.

With most of the negatives having been factored in the HUL share price, it is more likely to be a case of time correction rather than price. The stock is expected to stagnate at the current levels till a new, positive trigger comes up.

Q2 Performance:

HUL registered 11.5 per cent year on year increase in net profit to Rs 1,096 crores for the Q2FY17, which was somewhat higher than the market estimate of Rs 1,055 crores. Total income from operations rose by 15 per cent on a year-on-year basis to Rs 8,480 crores for the quarter ended 30th September 2016, as against Rs 8,348.60 crores in the corresponding quarter last financial year.

The net sales went up by 1.5 per cent during the quarter with domestic consumer business (FMCG) growing at 1.8 per cent.

Earnings before interest, tax, depreciation and amortization (EBITDA) for the September quarter stood at Rs 1,404.62 crores, reflecting a year on year growth of 5.1 per cent for the quarter ended 30th September 2016.

Hindustan Unilever Limited is a Mumbai based Indian Consumer Goods Company. It is held by Anglo-Dutch Company Unilever which owns a 67 per cent controlling share in HUL as of March 2015 and is the holding company of HUL. Hindustan Unilever products include foods, beverages, cleaning agents, personal care products and water purifiers. Today, HUL share price was trading in red while Nifty was on the rise. HUL is the top 500 recommendation by Dynamic Levels for the quarter.

Source  :  https://www.dynamiclevels.com/en/blog/hindustan-unilever-to-buy-or-to-sell