HUL share price: FMCG stock falls 5% post Q2; JM Financial sees 11% upside potential

Hindustan Unilever Ltd (HUL) shares slipped up to 4.8 per cent to hit a day’s low of Rs 2,475.20 on the BSE on Friday, following the release of its second-quarter results on October 23. This came against the previous close of Rs 2,602. At last check, the stock was trading 3.65 per cent lower at Rs 2,505.80.

Brokerage firm JM Financial has maintained its 'Add' recommendation on the FMCG major. The brokerage did, however, revise its target price to Rs 2,770. This revised target suggests an upside potential of over 11 per cent from the day’s trading price of Rs 2,505.80.

The market's negative reaction appeared to be focused on the company's volume figures. For the second quarter of FY26, HUL reported flat Underlying Volume Growth (UVG). Consolidated sales grew a modest 2 per cent year-on-year (YoY) to Rs 160.6 billion, in line with analyst expectations. The company noted that the GST transition had a 2 per cent impact on growth.

However, the brokerage termed the company's operating performance as "resilient". HUL's EBITDA was approximately 3-4 per cent ahead of street estimates, driven by "better gross margins". EBITDA margins came in at 23.2 per cent. On the bottom line, Adjusted Profit After Tax (PAT) declined 4.3 per cent YoY to Rs 24.8 billion.

Performance across divisions was a mixed bag. JM Financial highlighted that the Beauty & Wellbeing segment "did well," while the performance of Personal Care (soaps) and Home Care (detergents) was "weaker than envisaged".

The brokerage took positive note of new CEO Priya Nair's "emphasis on prioritising volume-led revenue growth". Management commentary remains optimistic, expecting an "uptick" in volume growth from the second half of the fiscal year, supported by favourable macros.

JM Financial stated it remains "constructive" and expects "execution to improve under new CEO". The firm cut its earnings estimates by 2-3 per cent to account for the GST transition impact and lower other income, but held its 'Add' rating. The report also highlighted the upcoming demerger of the low-margin ice-cream business, expected in Q3, which should lead to a 50-60bps improvement in reported EBITDA margins.