Motilal Oswal Securities has maintained 'Sell' on Hindustan Unilever (HUL) with target price of Rs 600 as against current market price (CMP) of Rs 634 in its report.
Commenting on the investment rationale, the stock broker said, ''HUVR's sales growth moderated to 8.6% in FY14 (Rs 280 billion), with continued slowdown across categories, channels and geographies. Volume growth of 4% was the lowest since FY09. Soaps & Detergent and Personal Products segments posted sales growth of 7.7% and 8.7% respectively, while Beverages registered double digit revenue growth. Soaps and Detergents contributed 45% of incremental value growth, while PP contributed 30%.
Volume growth in low single digit seems competitive, but it does not justify the premium valuations the stock commands, in our view. Continued softening in PP margins has long term profitability implications, in our view.
Going forward, recovery in F&L holds the key for margins. Valuation (31.6x FY16E and 28.4x FY17E) still remains expensive. Maintain Sell with a target price of Rs 600 (30x FY16E EPS).''
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