Shares of Hindustan Unilever
(HUL) rose nearly 2 per cent to Rs 2,457.90 on the BSE in intra-day trade on Friday, in an otherwise weak market, on a positive outlook. The stock of the fast-moving consumer goods (FMCG) company was trading close to its 52-week high level of Rs 2,504.30, touched on April 13, 2021. It was trading higher for the fourth straight days. In comparison, the S&P BSE Sensex was down 0.66 per cent at 51,994 points at 12:35 pm.
In the past four days, Hindustan Unilever
has outperformed the market by gaining 4 per cent, as compared to a 1.2 per cent decline in the benchmark index.
With various parts of India progressively opening up, the management of Hindustan Unilever
believes the impact from the second COVID wave would have peaked in May 2021 and things will progressively get better. The outlook from June 2021 onwards is positive, barring the emergence of a third COVID wave.
An uptick in GDP growth will likely percolate to consumer demand and accelerate penetration growth, premiumisation and shift to branded in key FMCG categories. Thus, absolute FMCG earnings growth too could accelerate in such an environment, even though relative performance appears weaker on earning growth.
During the period of heightened uncertainty and volatility (GFC, demonetisation, first Covid-19 wave etc.), staple stocks may have gone down but have comfortably outperformed Nifty, given their relative demand stickiness, pricing power, and strong balance sheets, analysts at Jefferies said in consumer sector update.
“While April-June quarter (1QFY22) will be impacted by the second COVID wave, the extent will be far lower compared with last year. Rural demand continues to remain resilient, and demand in Health, Hygiene, and Nutrition categories remains healthy. While discretionary demand will be affected, we expect the impact to be lower YoY. EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin is likely to remain under pressure owing to sequential raw material inflation and higher A&P spends,” Motilal Oswal Financial Services said in a stock update.
“Rural market continues to do better than urban, despite experiencing a higher impact from the pandemic in Q1FY22 versus last year. Prediction of a normal monsoon, good Rabi harvest, favourably timed Kharif sowing, and MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) provide prospective support as well,” the brokerage firm added.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.