Hindustan Unilever – Cautious Commentary On Rural Growth And Margins
On key performance measures, Hindustan Unilever performed in line with our and market expectations. With underlying domestic consumer sales growth (USG) of 11% on the back of a 4% UVG, reported sales increased by 11% to Rs. 12,724 crore.
The brokerage has set a target price of Rs. 2,900, representing a nearly 14% increase from the current price of Rs. 2546 a share.
Axis Direct believes that, the strength of HUVR’s diversified product portfolio was evident in the company’s Q2 results, which showed an improved trend across all discretionary product categories. Rural growth is expected to slow in the future, according to Nielsen statistics, while urban demand is expected to rebound strongly after being muted for more than two years. The possibility of increasing penetration in the Nutrition (HFD) segment still exists.
Outlook and Valuation:
“However, to factor in the drag on Gross Margins owing to persistent RM headwinds, w cut our FY22/23/24E Revenue/EBITDA/PAT estimates between 1-5%. Maintain BUY with revised TP of Rs. 2,900 (earlier Rs. 3,110) valuing the stock at 56x FY24E EPS,” the brokerage has said.
ACC – Resilient Performance Despite Cost Headwinds!
On a consolidated basis, ACC delivered a respectable performance, with revenue, EBITDA, and APT growth of 6%, 6%, and 24%, respectively, YoY.
The brokerage has set a target price of Rs. 2710, representing a nearly 21% increase from the current price of Rs. 2242 a share.
According to Axis Direct, the company had a healthy EBITDA margin of 19 percent, which was somewhat lower than our projection of 19.7 percent due to higher input costs. The quarter’s volume was 6.6 million tonnes per year (mntpa), up 1% year on year. While blended EBITDA per tonne increased by 5% year on year to Rs 1,084, blended realization/tonne increased by 4.9 percent to Rs 5,706 from Rs 5,442.
Outlook & Valuation:
“We believe ACC is well-positioned in its key markets with better pricing and volume growth even though we foresee input costs to remain elevated in the near future. Furthermore, with its sharp focus on cost optimization measures under project PARVAT, we expect the company to register Revenue/EBITDA/APAT CAGR of 8%/13%/14% from CY21-CY23E driven by volume CAGR of 7% and consistent realization improvement of 1% each over CY21E-23E. The stock is currently trading at 9x its CY22E EV/EBITDA. We value ACC at 12x its CY22E EV/EBITDA to arrive at a TP of Rs 2,710/share, implying an upside of 21% from the current price,” the brokerage has said.
ICICI Securities – Strong Performance Continues, Maintain BUY!
ICICI Securities Ltd. (ISEC) delivered a great set of results that outperformed our expectations across the board. The sustained momentum in client sourcing was a highlight of the quarter, with ISEC adding 583,000 new customers.
The brokerage has set a target price of Rs. 940, representing a nearly 15% increase from the current price of Rs. 820 a share.
Valuation and Recommendation
Acis Direct expects that ISEC to be protected from revenue cyclicity throughout market cycles as efforts are directed toward improving revenue granularity. The expansion of digital channels is assisting in the acquisition of new customers.
“Furthermore, expectations of this trend likely to sustain are encouraging and will aid revenues and AUM growth alike. We continue to like ISEC for its superior ROE profile, better brand recall, and innovative product proposition across customer segments. We maintain a BUY rating on the stock and revise a target price to Rs 940/share (20x Sept’23E), implying an upside of 15% from CMP, the brokerage has said.
Disclaimer
The above stocks to buy are picked from the report of Axis Direct. Please note investing in stocks is subject to market risks and one needs to be cautious at this point of time as markets have gone-up sharply. Neither the author, nor Greynium Information Technologies Pvt Ltd would be responsible for losses incurred based on a decision made.
