Several investment banks cut ratings on HUL stock
After shedding around 3 per cent on Tuesday, stock in Hindustan Unilever Ltd (HUL) slipped again by more than 6 per cent in early trade on Wednesday after several investment banks slashed their ratings on the company's stock.
Domestic brokerage IDFC, Bank of America Merrill Lynch, Nomura and Credit Suisse cut their ratings on HUL stock after the country's leading consumer goods producer reported slower-than-expected volume growth and a smaller-than-expected increase in royalty payments.
IDFC downgraded HUL stock to "underperformer" with a target of Rs 442 a share, while Bank of America Merrill Lynch downgraded the stock to "underperform" and cut its target price from Rs 477 a share to Rs 441 a share.
Explaining the reson behind their decision to cut rating on the stock, Nikhi Vora of IDFC Securities said, "Lack of volume growth is indicative of increasing pain point in existing portfolio and that is something markets have not taken kindly to."
Citi also downgraded HUL stock to "sell" and cut its target price from Rs 494 a share to Rs 450 a share.
HUL recently reported an increase of 16 per cent in third-quarter net profit, but a lower-than-expected volume growth and increase in royalty payments discouraged investors.
In the three months to December 31, the company's volume growth slipped to 5 per cent, the lowest in the past thirteen quarters. EBITDA margins slipped 120 basis points (bps) to 13.5 per cent.
For the FY14, HUL has projected earnings per share to decline by 2.75 per cent to Rs 17.2.