Hindustan Unilever is not just at a 52-week high but also at an all–time high. The most important milestone for the company is the Rs 6 lakh crore market cap. Four years ago, its market value was below ITC’s, and now, it is more than two times of ITC's. The FMCG pack itself is seeing a gain on flight to safety coming, so we have top five-six gainers across the board.

Factors for HUL's outperformance

There are a handful of factors for Hindustan Unilever's outperformance on Friday, the first one being the underperformance that we have seen in the stock over the last 12 months. Counting the last two hours' move on the stock, it will be up almost 20 percent in the last 12 months as against the Nifty index, which is up 45 odd percent.

Secondly, the recovery trade. The reason why these stocks were battered is because it is a margin accretive business, discretionary demand was impacted during the lockdown. Whether that will return once unlocking happens or not is the big question, and throughout all of this, rural demand itself was rather resilient. Moreover, the raw material inflation, which had peaked, has now come off its peak, and the companies have also gone ahead and taken some price hikes to mitigate the impact of the raw material inflation.

Also read: Should you buy HUL shares after Q1 earnings?

Future triggers for HUL

Future triggers are growth coming in their foods business with the Horlicks acquisition. There are a fair amount of synergies yet left to be unlocked. Then there is increased focus on premium beauty products. They have created a new segment for premium beauty products for D2C brands, and some of the acquisitions that they are doing out there. Finally, a lot of the cost optimization that the company had done during the pandemic; a large part of that will sustain going forward as well. So that would be a structural change in the margin.

Meanwhile, the only concern, which has been the perennial concern for all the FMCG companies, is the valuation - for HUL, it is 58 times FY23 earnings. It has never been a cheap stock and continues to be expensive.