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How to trade HUL? Stock tanks 6% post dismal Q3 vol growth

19 January, 2015 11:09 AM
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Shares of HUL were ripped apart as 3 percent volume growth in December quarter was quite disappointing. Over-optimism on growth hopes led by slew of brokerage upgrades drove the stock up 24 percent year-to-date.

However, the FMCG major lost steam soon after it announced December quarter earnings as its third quarter net profit jumped 17.9 percent year-on-year to Rs 1,252 crore, mainly led by income from land sale. Profit after tax before exceptional items stood at Rs 955 crore, down 10 percent compared to same quarter last year. Its oral care business suffered a blow due to rollback of excise duty benefits.

The stock lost 6 percent intraday on Monday, before closing at Rs 892.80, down Rs 49.65 or 5.27 percent.

Analysts are disappointed after the dismal performance and suggest to avoid it at the moment. Naveen Kulkarni, Co-Head of Research at PhillipCapital says the stock will correct a little bit. “In any case we were expecting this quarter not to be particularly strong because the base had a lot of promotional activity. For example in the personal care segment the relaunch of Fair & Lovely was in the base quarter. Also in the oral care category there was lot of promotional activity because of which the base was little higher. So, volume growth on that base has been a little disappointing,” he adds in an interview to CNBC-TV18.

Suruchi Jain, equity research analyst at Morningstar Investment Advisor also feels that the stock is overvalued now and one should avoid it for short term as fundamentals are not supporting it.

Agrees market expert Ambareesh Baliga that the stock is likely to see more correction.


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