HUL Share Price Target: Brokerage Bullish Amid Demerger Of Ice Cream Business - Buy, Sell Or Hold?

Axis Securities is bullish on Hindustan Unilever Limited (HUL). In its latest note on the HUL share, Axis Securities said that the core portfolio of companies under HUL is likely to grow at a 1x market rate and the future core includes brands that are the 'sweet spot' of premiumisation. The report comes days after the HUL Board accorded approval to the demerger of its ice cream business.

HUL Share Price Today | HUL Share Price History

On Monday, the shares of HUL traded lower. After opening at Rs 2485, the stock slipped lower to Rs 2460 and closed at 2479.15 apiece. HUL, which recently approved the demerger of its ice cream business, has been trading at a massive discount over its 52-week high. Against its 52-week high of Rs 3,035, the HUL stock is down almost 20 per cent within over 2.5 months.

HUL Share Price Target: Axis Bank Analysis

According to Axis Securities, the growth drivers for Hindustan Unilever Limited (HUL) are 

• Growth prioritization as per portfolio segmentation: Core portfolio (50% of sales – LUPs, Mass) is likely to grow at a 1x market rate; 
• The future core includes brands that are at the sweet spot of premiumisation and are expected to grow at 1.25x the market rate (10 brands with Rs 1,000 Cr+ turnover); 
• Market makers (premium face, hair, body wash, homecare liquids, condiments & mini meals, prestige & wellbeing) represent six long-term bets with a Rs 7,000 Cr portfolio, likely to grow at 1.5x the market rate. 
• Together, the future core and market makers are expected to contribute 80% of the delta.
• Near-term demand/margin challenges: On a cautionary note, the demand environment continues to remain challenging, with urban markets continuing to show weakness. Key raw materials (palm and tea) remain under inflationary pressure, and the company is likely to undertake low to mid-single-digit price hikes in its soaps and tea portfolio in H2FY25.
• It expects moderate margin expansion over the mid to long term.

Axis Securities On HUL: Key Factors

1) 19 brands generate a turnover of over Rs 1000 Cr (Surf Excel to reach Rs 10,000 Cr by end of FY25); 
2) Total reach stands at 9 Mn+ outlets (3 Mn direct reach), direct weighted distribution stands at 65% (vs 56% in FY22) while it targets 70% by FY27; 
3) Digital media contribution stood at 40% (up 3x from FY22); 4) Introduced renewed WIMI 2.0 which now captured affluent agglomerations across various 16 socio-economic clusters (WIMI was originally introduced in 2014 to classify India into 16 clusters vs. five traditional clusters)

According to Axis Securities, HUL's long-term outlook remains positive with an 18% upside potential from the CMP. “We maintain a BUY rating on the stock. Current TP: 2920/share,” Axis Securities said.

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