Why brokerages are bullish on Colgate, Dabur and HUL

The FMCG segement is one of the most sought after segment as it has risen by 22.46 percent since the start of the year compared to the 8.76 percent rise in the Sensex. Firstpost decided to check what brokerages have to say on FMCG companies post their June 2012 quarter results. Here are some views :

•Edelweiss maintains a hold position on Colgate Palmolive with a target price of Rs 1,200 against its current price of Rs 1,167, registering a marginal growth rate of 0.92 percent.

While the company reported a stellar performance for the June quarter, Edel continues to have a positive outlook on the company mainly on account of a 12 percent year on year volume growth in the toothpaste category and significant market share gain in toothpaste and toothbrush category. Also, P&G’s delayed entry in toothpaste is another positive for Colgate. Its mouthwash category also continued its upward growth trajectory following the launch of Colgate Plax Fresh Tea in March quarter. In the last one year the stock has shot up by 19 percent against the 10.6 percent fall in the Sensex.

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•Religare maintains a buy call on Dabur India with a target price of Rs 125 vis a vis the current price of Rs 117 with a negligible growth rate of 0.22 percent. This is mainly due to Dabur reporting an above expectations growth in net sales, volumes and earnings. The International business saw a 24 percent year on year growth for the quarter led by markets such as GCC, Egypt and Nigeria.

Also the management’s continued thrust on new launches, rural distribution and increase in advertising cost for existing brands is a positive factor. However certain key risks remain slowdown in domestic volume growth, slowdown in international business, pressure on gross margins due to increase in commodity prices and increase in competition in the sector. Despite the negatives the share price showed a yearly gain of 4.66 percent as against the Sensex benchmark index which showed a fall of 10.6 percent.

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•Kotak Securities is bullish on Hindustan Unilever with a target price of Rs 490 against its current price of Rs 476 per share, reflecting a growth of three percent. For the June 2012 quarter, HUL’s net profit more than doubled to Rs 1,331 crore boosted by an exceptional gain of Rs 607 crore from sale of properties while revenue rose by 14 percent.

However, Kotak retains the stock as its preferred pick as it expects good volume growth momentum and new launches to augur well for the company. While the stock has shot up by 7.5 percent today, it has yielded 43 percent returns in the last one year.