The share price of Hindustan Unilever (HUL) declined over 3 percent on Thursday, a day after the company reported its earnings for the quarter ended December 2020, missing estimates. While the company's revenues have improved, profit margins have been a point of worry.

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HUL reported a 19 percent rise in Q3FY21 net profit at Rs 1,921 crore from Rs 1,616 crore in the corresponding period of last fiscal.

Consolidated revenue from operations increased 21 percent to Rs 11,872 crore as compared to Rs 9,808 crore, YoY, driven by domestic volume growth of 4 percent.

Ebitda margin fell 87 basis points from the same period last year due to an increase in expenses.

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HUL Q3 results key takeaways: Upbeat about pick-up in consumer sentiment, says management

Here’s what brokerage houses have to say about HUL’s Q3 earnings:

CLSA

According to CLSA, the Q3 results were largely in-line, with revenue, EBITDA & earnings growth of 20/16/19 percent YoY. With a steady recovery in channels, operation and decline arresting in out-of-home, and discretionary offerings, the company’s management sounded more confident on near-term tactical volume strategy and execution, CLSA noted.

It continues to see HUL as a structural play in Indian fast-moving consumer goods and HUL is CLSA’s key pick for 2021. CLSA has maintained a 'Buy' call with a target price of Rs 2,925 per share.

Jefferies

The management intends to prioritise growth over margin. The pick-up in personal care is positive while the muted trend in the laundry is a disappointment, Jefferies said.

The brokerage has maintained a 'Buy' rating with a target at Rs 2,780 per share.

Citi

Citi has retained a 'Buy' call with a target at Rs 2,730 and raised revenue forecasts by 1-2 percent.

The company remains a very well-managed business. As mobility improves, the drag due to discretionary/OOH segments should reverse, Citi said.

JPMorgan

JPMorgan remained 'Overweight' on the stock with a target at Rs 2,610. It lowered FY21-23 EPS estimates by 3-5 percent to account for lower margin.

Motilal Oswal

The company’s earnings growth has gained further momentum in recent years (17% EPS CAGR in the past three years v/s ~12% CAGR over 10 years). This is particularly impressive given the weak mid-single-digit earnings growth posted by (much smaller) peers in recent years, Motilal Oswal said.

Valuing the company at 55x FY23 EPS, the brokerage house arrives at a target price of Rs 2,690 and maintains a 'Buy' call.

At 11:05 am, the shares of Hindustan Unilever were trading 2.46 percent lower at Rs 2,331.85 apiece on the BSE as compared to a 0.76 percent loss in the benchmark Sensex.

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First Published:Jan 28, 2021 12:15 PM IST