Hindustan Unilever (HUL) saw its shares plummet by nearly 7% on Tuesday, marking its largest single-day decline in six years. This downturn followed the release of its June-quarter earnings, which failed to meet market expectations due to slower volume growth and significant pressure on margins. The company's net profit declined by 3% year-over-year to $321 million (Rs 2,673 crore), despite a 5% increase in underlying volume growth and a slight revenue increase.
The decline in HUL’s stock had a ripple effect across the broader market, making it the biggest drag on the Nifty FMCG index and the Sensex, which ended largely flat despite gains in IT stocks. Other FMCG companies like Tata Consumer Products also saw declines, while Bharat Electronics (BEL), Coal India, and NTPC fell due to profit booking and investor rotation out of PSU stocks.
Despite the immediate negative reaction, several analysts upgraded HUL's rating. Jefferies, for example, upgraded HUL from "underweight" to "neutral," citing the long-term potential of the company and attractive valuations. Analysts noted that the temporary weakness from higher raw material and operating costs, coupled with evolving market dynamics, presents a tactical buying opportunity for investors looking at the company's strong brand portfolio and market leadership. The respite in crude oil prices and improving monsoon conditions in India are also seen as positive factors that could alleviate cost pressures in the future, supporting HUL's recovery and broader market sentiment.
