1800% Dividend Payout Soon: Largest FMCG Stock HUL Likely To Rise By 23% Ahead, TP Set Rs 3,068

In a matter of a week, the largest FMCG player, Hindustan Unilever (HUL) will trade ex-dividend for a whopping 1800% interim dividend payout. HUL shares have a strong track record of sharing its profits in the form of hefty dividends with shareholders. It is safe to say, that HUL is among dividend king stocks. And this heavyweight stock has a potential of over 23% upside ahead. While recommending buy, Religare Broking has set a target price of Rs 3,068 per share.

HUL who recently declared its earnings for Q2FY24, also recommended a dividend of Rs 18 per share having a face value of Re 1 each for the financial year ending 31st March 2024. The record date to determine the entitlement of the shareholders for the interim dividend has been fixed as Thursday, 2nd November 2023, and the dividend will be paid to the shareholders on or after Thursday, 16th November 2023.

In percentage terms, the dividend payout will be a whopping 1800%. This would be HUL's first interim dividend for FY24. As per the filing, in H1FY24, the company will pay Rs 4,229 crore worth of dividends, which is up by 6% from Rs 3,994 crore or Rs 17 per share dividend payout in H1FY23.

In FY23, the company paid a total dividend of 3900% amounting to Rs 39 per equity share.

In Q2FY24, the company posted a net profit of Rs 2,717 crore, up by 4% YoY, while sales stood at Rs 15,027 crore, also recording similar growth of 4% YoY. EBITDA came in at Rs 3,694 crore, up by 9% YoY, while EBITDA margin expanded by 130 basis points to 24.6% in Q2FY24 as against 23.3% in Q2FY23.

HUL shares are expected to rise by over 23.5% at least from the current price level. On October 23rd, the stock stood at Rs 2,484.60 apiece, down by 0.42%. Religare expects the stock to rise to Rs 3,068 per share ahead.

According to Religare Broking, HUL's Q2FY24 numbers came largely in line with its expectation wherein revenue grew in single digits with strong improvement in margins.

Looking ahead, Religare's note added, "We expect rural areas to pick up pace and volumes to improve and gross margin to sustain at around levels of 23-24%. Besides, management will continue to invest behind its core brands to maintain its position from the competition, also focus on innovation & premiumization well as spend on advertisement and at the same time maintain margins. We are positive on the growth prospect ahead given its leadership position, strong product portfolio and better financials as compared to peers."

On a financial front, Religare's note said, "We have estimated its revenue/EBITDA/PAT to grow at 15.5%/18.3%/17.5% CAGR over FY23-25E and recommend a Buy rating with a target price of Rs 3,068, assigning a PE multiple of 51x on FY25E EPS."

Among other brokerages, Centrum said, "We remain cautiously optimistic expecting mid-single digit volume growth as near term operating environment continue to be challenging. We tweaked our earnings and introduced FY26E and retained ADD rating, with a revised DCF-based TP of Rs2,820 (implying 53.0 avg. FY25E/FY26E EPS)."

Along similar lines, Emkay Global's note said, "HUL is likely to see a muted near-term show, given rural slowdown hurting its volume growth and pricing turning flat-to-negative. From the medium-term perspective, we see an easing of the raw-material scenario paving the way for regional competition, which has accentuated across most categories of HUL. Additionally, sustained inflation/peak raw material prices for health food drinks are bothering, which continues to impact category growth. We maintain HOLD with Sep-24 TP of Rs2,800, based on 52x P/E (~5% discount to its last five-year average forward P/E)."

Disclaimer:

The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.