This FMCG stock up 12% in April so far; brokerage target hints at 21% further upside

FMCG heavyweight Hindustan Unilever Ltd (HUL) has been on an uptrend this April. The stock has closed green in nine of its last 13 trading sessions, rallying nearly 12% over this period. 

On Tuesday, HUL shares surged 3.13% to settle at Rs 2,305.40 apiece on the BSE, up from a previous close of Rs 2,235.50. 

ICICI Securities, in its latest note, said that the company is capable of steering through the macro headwinds. "As early signs of commodity inflation return to the FMCG basket, we believe HUL is structurally better positioned to navigate the cycle," the brokerage said.

“Historically, inflationary environments allow large players to flex their pricing power, driving positive price-led growth. Though this could weigh on near-term margins, given the lag between commodity inflation and price hikes, we believe HUL has levers to drive operating leverage primarily through tactical rationalisation of ad spends,” ICICI Securities said.

During inflationary cycles to protect profitability, the brokerage noted that HUL can trim its absolute advertising budgets without surrendering its competitive share of voice, shielding its EBITDA margins.

According to the brokerage, inflationary pressures disproportionately squeeze the unit economics of smaller, regional players. This dynamic sets a favorable stage for large-cap companies like HUL to swoop in and absorb incremental volume share, it said.

“We adjust our EPS estimates by -0.3%/1.2% for FY27/28E, modelling revenue/EBITDA/PAT CAGR of 10%/11%/10%, respectively, over FY25–28E, the brokerage said.

HUL share price target

Meanwhile, ICICI Securities has maintained its 'Buy' rating on the FMCG giant, raising its target price to Rs 2,800 from Rs 2,700. From current levels, this revised target points to an upside potential of over 21%.