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Why HUL stock became top Sensex loser today after Q1 net profit met estimates

It fell despite strong earnings as some brokerages downgraded their target price citing the expensive valuations of the stock. The stock opened at 1770 level on the BSE compared to Monday's close of 1753.85 on the BSE.

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Why HUL stock became top Sensex loser today after Q1 net profit met estimates

The Hindustan Unilever stock was the top Sensex loser today after the firm announced its Q1 net profit which met street estimates. At 1:09 pm, the stock was trading 3.11% or 54 points lower at 1699 on the BSE.

It fell despite strong earnings as some brokerages downgraded their target price citing the expensive valuations of the stock.

The stock opened at 1770 level on the BSE compared to Monday's close of 1753.85 on the BSE.

Interestingly, the stock hit a new high of 1,779.95 on the BSE in early trade today.

The stock has fallen after four days of consecutive gains.

It has gained 48% during the last one year and is up 24% since the beginning of this year.

The stock reversed its early gains and ended 4 per cent lower at Rs 1,683.75 on the BSE. During the day, it slumped 4.47 per cent to Rs 1,675.30.

FMCG firm Hindustan Unilever on Monday reported a 19.17 per cent rise in standalone net profit at Rs 1,529 crore for the first quarter ended June 30, 2018, led by strong volume growth and sustained margin improvements. The company had posted a net profit of Rs 1,283 crore in the April-June quarter a year-ago.

Its total income during the quarter under review stood at Rs 9,622 crore, up 3.07 per cent as against Rs 9,335 crore in the corresponding quarter a year ago.

"During the quarter, our comparable domestic consumer growth was 16 per cent with underlying a volume growth at 12 per cent," HUL said in a statement.

Commenting on the results, HUL Chairman and Managing Director Sanjiv Mehta said: "We have delivered another strong performance in the quarter, with double-digit volume growth across all three divisions and further improvement in margins."

Brokerages' call on HUL

Sharekhan gave a ''buy'' target of 1,950 on the stock yesterday. The stock can be bought at 1754 level for a duration of 52 weeks.

Edelweiss Research

We envisage HUL to be key beneficiary of the anticipated rural recovery and herbal push. We estimate better-than-expected volume growth (trend too indicates the same) and with rural reviving, we raise our target multiple to 55x (earlier 50x) and arrive at revised target price of  Rs 1,887 (earlier Rs 1,647) on FY20E EPS. We maintain 'HOLD/SP' as from current level (52.7x FY20E EPS), the stock offers limited upside.

Motilal Oswal

On a target multiple of 54x June 20E EPS (25% premium to three-year average due to significantly improving business fundamentals), we get a target price of  Rs 2,010 (prior:  Rs 1,925). Maintain Buy.

HDFC Securities

We value HUL at 45 times JUN-20 earnings per share and derive target price of Rs 1,709. HUL has been our top picks as we believed that category leaders would outperform during challenging periods. With normalizing trade conditions and expensive valuations, we believe recovery is now priced in. The stock is up by 27/51% in the last 6/12 months. With limited upside, we have recently downgraded to NEUTRAL.

CLSA

The stock is overpriced. Target price of the stock is Rs 1950. We acknowledge that the stock looks expensive but in these uncertain times, is likely to stay this way, particularly in the context of 18% EPS growth in CL 19.

Macquarie

1Q19 earnings ahead of our estimates on higher volume growth. Confident higher volume growth will continue on rural turnaround. The stock remains our top pick and a Marquee idea. The stock is overpriced and can be bought with a target price of Rs 1870.

Jefferies

Steady Q1 but believe volume growth is likely to taper down. Given additional headwinds of rising input prices and competitive pressures, it would be difficult to maintain pace of margin expansion. The stock is downgraded to Hold with a target price of Rs 1680 on unfavorable risk-reward.

Morgan Stanley

The firm reported 6% underlying two-year volume compounded annual growth rate and another quarter of strong operating margin expansion. We see downside risks to consensus earnings estimates; combined with record-high valuation (56x F2020e P/E). The brokerage is underweight on the stock with a target price of Rs 1260.

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