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In an otherwise disappointing trading day, with the markets remaining in the red, Hindustan Unilever proved to be a bright spot on Wednesday. The FMCG company’s stock gained over 3 per cent, closing at ₹799.50 (up ₹24.80) on the NSE and at ₹802.10 (up ₹26.95) on the BSE.
High intraday trade Trading volumes in the stock multiplied over five times with 3.23 lakh shares exchanging hands, against a two-week daily average of 61,000. Intraday speculation in the stock was high, with only about 38 per cent of shares being presented for delivery.
Interest in the stock seems to have been driven by reports by several brokerages and research firms published after market hours on Tuesday upgrading their views on HUL.
Slew of positive calls Credit Suisse upgraded its views on the stock from neutral to outperform, based on falling input prices, especially with regard to crude and palm oil, both of which have seen unprecedented price slumps. JP Morgan’s research arm has raised the stock’s rating from underweight to neutral, backed by expectations of volume recovery in the coming fiscal and better margins, again on account of lower costs.
Deutsche Bank has changed its recommendation to ‘buy’ from ‘hold’, while brokerage firm Motilal Oswal suggests a ‘hold’. All the reports focus on HUL’s investments and success in premium product segments, particularly by using low-unit packs.
However, Motilal Oswal says the stock is not yet a ‘buy’ because the stock, at over 36 times its 12-month forward EPS, is trading in the upper band of its five-year valuation. “Thus, we believe there is limited scope for further re-rating in the valuation multiples,” the report says.
Property sale to boost Additionally, HUL has agreed to sell its previous headquarters in South Mumbai (about 1.53 lakh sq ft) to HDFC for a rumoured ₹300 crore. Maintaining its ‘hold’ call, ICICI Securities has said the proceeds from the sale is likely to boost HUL’s earnings in FY15 even as the company is well poised to capitalise on growing consumer demand in the next three to five years.
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