 "HUL no longer a market hero; Morgan Stanley says stock over-valued")
Shares in Hindustan Unilever were down 0.6 percent in afternoon trade after rising as much as 4.2 percent on Monday in reaction to the company’s earnings. HUL’s sales volumes in the July-September quarter grew 5 percent, in line with market estimates of 4-5 percent growth.
Traders had worried Hindustan Unilever would miss its sales volume estimate.
Sales volumes in the September quarter grew 5 percent, in line with market estimates of about 4-5 percent growth but slower than the 7 percent growth logged a year before.
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The company said on Saturday its net profit in the September quarter rose an annual 13.2 percent to Rs 914 crore. Analysts had on average estimated a net profit of Rs 870 crore.
HUL said the slowdown in sales growth could last until next March although it is hopeful of a pick-up in the medium- to long-term as consumer demand improves.
Hindustan Unilever shares were up 1.3 percent at 9.31 am, stronger than a 0.3 percent gain in the broader Nifty.
However, Morgan Stanley has an underweight rating on the stock citing high stock price. Intrinsic value, or the actual value, for HUL is Rs 474, Morgan Stanley said, adding that it sees better opportunities elsewhere in universe.
HUL shares are currently trading around Rs 600 after rising 13 percent so far this year as compared to a 16 per cent increase in the consumer sector index of the Bombay stock exchange.
Hindustan Unilever faces a difficult choice between raising prices and retaining market share, as high promotional expenditure pinches margins and higher prices hurt volumes.
Valued at $21.5 billion, Hindustan Unilever also makes Fair and Lovely skin cream, Clinic Plus shampoo and Lipton tea.
Higher promotional spending drove up sales in the personal care segment by 12 percent year-on-year, while the company’s food business grew an annual 9 percent.
“However, there was price deflation in soaps as company passed on the benefit of low commodity costs to consumers. In skin care, growth stepped up to double digit aided by lower base and healthy sales pick up ahead of winter,” said Angel Broking.
With inputs from Reuters