HUL Stock Analysis [April 2024] – Why I am bullish on this stock?

Today, I'll be sharing an analysis of a very popular stock with you.

The name of this stock is HUL or Hindustan Unilever Limited. Its name is not directly known but many brands under it are famous in every household. This includes Vaseline, Farmers, Surf Excel, Boost, Lifebuoy – and many more.

HUL Stock: News

HUL stock has been in the news a lot and I'll tell you why.

This stock has not performed well in the last 3 years. And today it is touching its 52-week low. A lot of you messaged me on Instagram asking for my opinion on HUL. Therefore, for you, I will only share my opinion. Buying, holding, or selling HUL stock should completely be your own decision.

Let's Start HUL Stock Analysis

HUL had to cut prices on many of its products due to increased competition. This has significantly affected its revenue and margins.

A major portion of HUL's revenue comes from its home care division and price cuts on products like Surf Excel, Vim, and Rin bar have seriously affected their revenue and profit growth.

But according to me, the decision to cut prices was the right step, even though it led to financial losses. By doing so, the company prioritized its brand loyalty and customer retention, which are crucial for long-term business success. And I believe that long-term investors would completely agree with the company's consumer-focused decisions.

So, a major reason for the company and stock's poor performance has been price cuts. Then, there is the overall poor performance of the FMCG sector and the poor expectations from this sector in the future.
There is very little expectation of volume growth from the FMCG sector in the coming quarter, i.e., March 2024, and generally, growth in 2024 is expected to be slow.

The FMCG sector has previously shown annual growth of 8-9%, but this year, growth is expected to be only between 4.5-6.5%. When viewed alongside increasing competition, this is a discouraging sign for investors.

But let's look at this stock more practically. Over the last three years, the stock price has fallen 9% after initially rising by 20%.

But has the revenue fallen in this three-year period? Not at all. The revenue in the financial year March 2021 was around 47,000 crore rupees, and for FY 2024, it is expected to be over 61,000 crore rupees.

During the same time, the company has grown both its operating profit and net profit.

Throughout this period, HUL has increased its dividends and maintained a healthy payout ratio.

PE Ratio

If we look at the PE ratio graph, the company is trading at its lowest PE in five years.

Compared to other companies in the FMCG sector, HUL has the largest market cap and also has a relatively low PE ratio.

But for now, I would consider the low PE ratio a positive sign because HUL is still growing its revenues and profits.

If the company were to start incurring losses, then a low PE ratio would be a problem. But for now, profits are growing gradually.

HUL is currently at a 5% loss in my portfolio. However, I will continue to invest in it regularly. I've already shared this with my YouTube Community members.

If you want fast updates on my investment activities, you can join the YouTube Member community too.

My Opinion on HUL Stock

Anyway, HUL is a long-term stock in my portfolio. So, I'm not too worried about the low growth projections for the next year. But it's not like HUL is the only FMCG stock in my portfolio. I have also invested in several other FMCG stocks.

Diversification is always important. Therefore, your portfolio should be diversified in various ways. Your portfolio should include stocks of different market caps, different sectors, and industries, and even within one sector, you should have 2-3 different stocks.

For instance, HUL is a very large-cap company with a market cap of 5 lakh crore, so its growth potential is not as high.

Therefore, I have also invested in some lower market cap FMCG stocks, like Tata Consumer Products. This stock has a market cap of 1 lakh crore and good growth potential.

I'll talk about Tata Consumer in more detail another time. So, please subscribe to my channel and stay tuned! For now, I just want to say that I have confidence in HUL's stock, and I'll continue to average out my investments.

According to many Research Analysts, this stock could go up by up to 40%. But a moderate growth projection is that it might only go up by 15-20%. As we have already discussed, revenue and profits are expected to grow by just 2-4%.

There are no major red flags, regarding HUL's shareholding pattern. FIIs have cut some positions, but Mutual Funds have definitely increased their holdings over the last year.

HUL's report is coming on the 24th of April and it will be just as predicted by the users. The company is busy with new strategies and new brands to optimize its business. For instance, HUL recently announced 7000 layoffs to optimize costs and talked about separating its ice cream business.

Bottom Line

But the point of this video is that HUL is going through a struggling phase. When competition increases during an extreme bull run, it makes sense for large-cap stocks to experience this. There are no fundamental issues with HUL.

And I wouldn't call this a major bulk investing opportunity in HUL, but I will gradually increase my positions. I'll also stay diversified in other FMCG stocks.

If you want to see my full stock portfolio, you can check it out in the YouTube Member community.

I'll make a short video or reel to update you if there's any change in my strategy as soon as HUL's annual report comes out.

I'd really like to know what your opinion is on HUL stock, so comment down below!