Shares of Hindustan Unilever (HUL) hit an over 11-month high at Rs 2,728.55, as the stock of the fast moving consumer goods (FMCG) giant gained 2 per cent on the BSE in Monday’s intra-day trade in an otherwise weak market. The stock traded at its highest level since October 19, 2021. It is quoted close to its 52-week high of Rs 2,780 touched on September 24, 2021, the BSE data shows.
In the past one week, HUL has outperformed the market by gaining 6 per cent. In comparison, the S&P BSE Sensex was down 2 per cent during the same period. Further, in past six months, the stock has rallied nearly 40 per cent, as against 0.34 per cent decline in the benchmark index.
At 09:48 am, HUL traded flat at Rs 2,680, as compared to 1.3 per cent decline in the Sensex.
While there are near term concerns around inflation, the recent softening of commodities, forecast of a normal monsoon, and monetary/ fiscal measures taken by the government augur well for the FMCG industry, analysts say.
HUL management while announcing April-June quarter (Q1FY23) results on July 19, said that they are confident of the medium to long term prospects of the Indian FMCG sector and remain focused on delivering a consistent, competitive, profitable and responsible growth.
HUL saw 6 per cent volume growth, mainly on account of low base quarter last year impacted by second Covid wave. However, on a three year CAGR basis, HUL’s volumes were flat.
In the last few quarters, volume growth was adversely impacted due to slower demand conditions specifically in rural regions considering consumer started shifting towards economy brands & lower SKUs. Grammage reduction in smaller packs also impacted volume growth. Given inflation in palm oil & crude started cooling off in last two months, FMCG companies would be able to re-store grammges and prices. “We believe volume growth as well as gross margins would recover from Q3 onwards. Moreover, companies foraying into large opportunity size categories would be able to grow at a sustainable pace in the long run,” analysts at ICICI Securities had said in Q1 earnings wrap.
HUL’s flexible business model allows the company to adapt its portfolio and respond quickly to develop new offerings that suit consumers’ and customers’ changing needs during economic downturns. “We regularly update our forecast of business results and cash flows and, where necessary, rebalance investment priorities. We believe that many years of exposure to challenging market conditions have given us experience of operating and developing our business successfully during periods of economic & political instability,” HUL said in FY22 annual report.