Hindustan Unilever Falls Tuesday, Underperforms Market

Hindustan Unilever Limited (HUL), India's largest fast-moving consumer goods (FMCG) company, faced a challenging Tuesday as its stock underperformed the broader market. The company's shares fell by 4% in early trading on October 24, following the release of its September quarter results. This article explores the reasons behind HUL's underperformance and its potential impact on the company's stock price.

Weak Macroeconomic Factors and Segment-wise Performance

HUL's revenue of ₹15,508 crore was marginally below the CNBC-TV18 poll of ₹15,665 crore, and volume growth stood at 3%, compared to expectations of 4% to 5% growth. The company's Home Care business grew above expectations, while the Beauty and Personal Care, and Foods & Refreshments businesses declined, contrary to expectations of growth. These factors contributed to HUL's underperformance compared to the broader market.



Ice Cream Business Separation and Analyst Ratings

HUL announced its intention to separate its ice cream business, which may have caused uncertainty among investors regarding the future of this segment and its impact on the company's overall performance. Brokerage firms such as JPMorgan maintained their ratings on the stock but cut their price targets, reflecting their concerns about the company's near-term demand outlook and volume growth miss. Morgan Stanley remained "underweight" on HUL, citing overhangs in the Personal Care and Foods & Refreshment categories.

Impact on HUL's Stock Price

The combination of weak macroeconomic factors, segment-wise performance, ice cream business separation, and analyst ratings led to a 4% decline in HUL's stock price on October 24, 2024. However, it is essential to consider that HUL's stock price has been trading above its 100-day and 200-day moving averages, indicating a bullish trend. Analysts have given 'BUY' ratings for HUL stock, with target prices ranging from ₹2,800 to ₹3,080, indicating potential upside in the stock price.

Conclusion

Hindustan Unilever's underperformance on Tuesday can be attributed to weak macroeconomic factors, segment-wise performance, ice cream business separation, and analyst ratings. Despite the short-term setback, HUL's stock price has been trading above its moving averages, and analysts maintain a positive outlook on the company. Investors should closely monitor HUL's performance and the broader market trends to make informed decisions about the company's stock.