Buy Hindustan Unilever, target of Rs 305: Emkay

Emkay Global Financial Services has maintained its buy rating on Hindustan Unilever with target price of Rs 305 in its April 08, 2009 research report. “HUL implemented price cut of 4%-20% on select brands and product categories.

The price cuts are implemented either directly (20% price cut on Wheel Active Blue) or indirectly through weight changes (4.2% weight increase in Lifebuoy and 6.7% – 8.3% weight increase in Wheel Green). Considering above mentioned price cuts on select brands, total blended price reductions is approximately 1.2%. This translates into net cost saving of Rs 5,301 million compared to Rs 7,637 million earlier and additional EBITDA margin of 2.9% versus 4.1% earlier.”

“Recent price reductions ratify our call that consumer staple companies will retain some savings to improve margin profile and intensify advertisement activities and utilize the balance for price reductions to benefit consumers. The recent price reduction on select brands is in-line with expectation. Despite adjusting the above price actions, HUL can implement incremental price reductions of 3.1% without impacting FY10E earnings estimates and intensify advertisement activities. Our earnings forecasts for CY09E remain unchanged at Rs 11.7/Share. We maintain our BUY rating with target price of Rs 305,” says Emkay Global Financial Services’ report.

Tags: buy, buy rating, buying, hindustan unilever

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