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Reduce Hindustan Unilever, target Rs 1,872: Elara Capital

Elara Capital has given a 'reduce' recommendation on Hindustan Unilever with a target price of Rs 1,872.

Shares of Hindustan Unilever traded at Rs 1,847.35 around 1:15 pm on 10 June, 2019. The brokerage has set a one-year horizon for the stock to hit the target price.

"We downgrade our rating to reduce from accumulate with an unchanged target price of Rs 1,872 based on 45 times FY21E earnings per share (EPS) of Rs 41.6, due to the stock price run-up by 7.4 per cent in the last three months," said the brokerage.

India has a sustained GDP growth of over 6.8 per cent post the liberalisation period of 1991-2017. The brokerage believes a broad-based GDP growth of more than 7 per cent per annum in the next decade can propel India to become a upper middle income economy, which can kick in the J-Curve for the FMCG industry in India.

"In our view, Hindustan Unilever will be the biggest beneficiary of premiumization in India, with a market share in modern trade and eCommerce higher than in general trade and overall 30 per cent over indexed in terms of premium products compared to the market," said the brokerage.

The personal care (PC) segment has potentially five large, underpenetrated categories, such as hand wash (40 per cent of soaps in Indonesia are in liquid form while in India it is nearly 26 per cent only), face wash, body lotions, conditioners and shower gels, which have low penetration levels in the range of 3-26 per cent but with a high adoption rate for traditional substitutes, such as bar soaps (substitute for hand wash & shower gels) and oils (substitute for body lotions & conditioners).

As per the brokerage, HUL has the “right to win” in these categories due to a strong brand portfolio (six personal care brands with sales of more than Rs 1,000 crore), such as Dove, Tresemme, PoRead More – Source
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