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HUL shares rise 7% in 3 days on consumption boost hopes; good time to buy?
Hindustan Unilever (HUL) shares moved higher by 2 per cent to ₹2,656.60 on the BSE in Wednesday's intraday trade, extending its rally to a third straight session. The stock of the fast moving consumer goods (FMCG) company has surged 7 per cent during the period on hopes of a consumption boost.
In comparison, the BSE Sensex and BSE FMCG index added 1.5 per cent and 3.4 per cent, respectively, during the same period.
In the past six months, too, HUL shares have outperformed the market by surging nearly 20 per cent as compared to 8 per cent rise in the BSE Sensex and 9 per cent gain in the FMCG index.
What's driving HUL stock price?
The government, recently, proposed GST 2.0 reforms which aims to rationalise the current multi-slab structure into a simpler framework, with two main rates of 5 per cent and 18 per cent, and a higher 40 per cent slab for luxury and sin goods.
The aim is to make products more affordable domestically and likely boost consumption, especially amid the approaching festive season. During his Independence Day address, Prime Minister Narendra Modi said the next-Gen GST reforms could be rolled out by Diwali 2025.
While the majority of FMCG items are in the 18 per cent GST slab, their raw materials, largely, fall under the 12 per cent slab, resulting in lower input GST for FMCG companies.
The income tax relief for the middle class and increased investments for rural development will help drive consumption and propel growth of the premium product market, according to analysts.
HUL, India's largest FMCG company, has a strong portfolio in the homecare and beauty and personal care categories. With over 50 brands spanning 16 distinct categories such as personal wash, fabric wash, skin care, hair care, oral care, deodorants, colour cosmetics, beverages, ice creams, frozen desserts, and water purifiers, HUL is part of the everyday life of millions of consumers across India.
HUL rating, latest share price target
Recovery in rural demand, better offtake for out-of-home categories, addition of relevant products in the portfolio and sustained improvement in penetration in key categories remain key growth drivers in the near term.
"HUL is well-poised to achieve good growth in the coming years with a leadership position in over 85 per cent of the portfolio and a presence in more than nine million stores. A better product mix, operational efficiencies and integration benefits would help margins to improve in the coming years," according to Mirae Asset Sharekhan. It has a 'Buy' on the stock with a revised target price of ₹2,832.
Motilal Oswal Financial Services, too, has a 'Buy' rating on HUL stock with a target price of ₹3,000 (55x June'27E EPS).
The company focuses on volume-driven earnings growth, for which the company is ready to compromise on the near-term margin, and the strategy looks outcome-oriented. Q1 performance hints at the beginning of a much better volume print delivery in the coming quarters, the brokerage opines.
Analysts at MOFSL, thus, believe the new CEO can further capitalise on the volume drive with her understanding of Indian consumers and the company's execution playbook.
"HUL is seeing encouraging macroeconomic conditions. Consumption demand trends for the last three months reflected a sequential improvement. HUL expects H1FY26 revenue growth to be higher than in H2FY25, due to its internal initiatives and improving macro conditions," said those at BNP Paribas Securities India.
The brokerage firm expects HUL's volume growth to start recovering in H1FY26, in line with management commentary. It also sees HUL as a key beneficiary of a recovery in rural growth. The brokerage firm has an 'outperform' rating on HUL with a target price of ₹2,780.
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