HUL shares fall 3% on Q2 business update; more details

Hindustan Unilever Ltd (HUL) shares fell 3% on Monday after the company projected subdued business growth for the September quarter. In the Q2 business update, HUL stated it expects the consolidate business growth for the September quarter will be flat to low-single-digits on a year-on-year basis.

HUL shares slipped 2.66% to Rs 2443.50 against the previous close of Rs 2510.85 on BSE. Market cap of the firm  stood at Rs 5.85 lakh crore. 

The company attributed the Q2 business update to the transitory impact due to the trade and channel disruption on account of the GST rate rationalisation, which was announced earlier this month. The new GST rates, which reduced prices of essential goods including FMCG items, became effective from September 22.

HUL said this impact would continue in October as well, which will be the first month of the third quarter of the current financial year. The company highlighted that a recovery will happen from November.

Meanwhile, Morgan Stanley reiterated its "equalweight" rating on HUL, setting a price target of Rs 2,335 and stating the commentary from HUL is below market expectations.

The brokerage firm noted that consumers have delayed their pantry buying, which will impact September sales and the impact will continue in October as well, due to the existing inventory.

Jefferies, meanwhile, maintained its buy recommendation with a target price of Rs 3,000, noting that although GST cuts are positive for demand, the transitory impact has hurt September offtake.

Jefferies expects the impact to be similar for other FMCG companies in the September quarter.

HUL confirmed expectations that the GST rate rationalisation would create a temporary disruption in trade channels, impacting September and October sales. The company has not indicated any further immediate corporate actions. Jefferies anticipates similar effects across other FMCG peers during the September quarter, in line with HUL's statement regarding trade disruptions and inventory adjustments. Investors and market participants are expected to monitor any developments in the coming months as HUL projects recovery from November onward.