Synopsis:
Hindustan Unilever Ltd is down by 6% in the last year. Goldman Sachs gave its first Buy recommendation on the stock, projecting a further upside of 13 percent.
With a market capitalization of Rs 6,01,554 crores, the shares of Hindustan Unilever Ltd are currently trading at Rs 2,560 per share, down by 16 percent from its 52-week high of Rs 3,034.50. Over the past five years, the stock has delivered a poor return of 15 percent.
Goldman Sachs has made a significant move by upgrading Hindustan Unilever Ltd. (HUL) from a “Neutral” to a “Buy” rating for the first time since it covered the company back in 2022. The brokerage raised its target price from Rs 2,400 to Rs 2,900, suggesting a potential upside of 13 percent from its current market price.
The brokerage pointed to a positive shift in HUL’s earnings outlook, driven by improving macroeconomic conditions and important internal strategies. They anticipate that the company’s revenue growth will pick up to high single digits by the latter half of FY26 and carry on into FY27.
Moreover, Goldman Sachs believes that as revenue growth gains momentum, HUL’s margins will also see a rise because of its operating leverage. With fixed costs and advertising expenses being spread over increased sales, profitability is set to improve.
This recovery in margins is projected to lead to double-digit Earnings Per Share (EPS) growth from FY26 to FY28, a significant change from the low single-digit CAGR observed between FY23 and FY26.
On the flip side, the brokerage has pointed out two major risks to their outlook: a sudden spike in raw material costs and the worsening environment in the macro industry.
Financial Highlights
HUL reported a sales growth of 5 percent to Rs 16,323 crore in Q1 FY26 as compared to Rs 15,523 crore in Q1 FY25. However, its EBITDA margins shrank by 130 bps and currently stand at 22.8 percent from the previous year’s margin of 24.1 percent.
Coming down to its profitability, the company delivered a net profit growth of 6 percent to Rs 2,768 crore in Q1 FY26 as compared to Rs 2,612 crore in Q1 FY25. Hindustan Unilever Ltd. (HUL) reported mixed performance across key segments.
The Home Care segment contributed the highest with Rs 5,777 crore in revenue, showing a 2 percent year-on-year growth. The Beauty & Wellbeing segment followed with Rs 3,631 crore, delivering an impressive 11 percent growth.
The Personal Care division brought in Rs 2,540 crore, marking a 6.45 percent rise, while the Foods segment clocked Rs 4,016 crore, registering a 4.31 percent increase.
While Hindustan Unilever Ltd. has had a rough year with a 6 percent drop, Goldman Sachs’ optimistic upgrade hints at a potential comeback, thanks to better earnings visibility, operating leverage, and improved macro conditions. The company’s steady performance across segments and the possibility of margin recovery make it a stock worth keeping an eye on in the FMCG sector.
However, investors should really do their homework and think about their risk tolerance, especially considering the potential for raw material inflation and challenges in rural demand, before jumping into any investment decisions.
Written by Satyajeet Mukherjee
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