Hindustan Unilever (HUL), India's largest fast moving
consumer goods company, plunged furtheron Wednesday global
investment firms, Nomura, Citi and Bank of America Merrill Lynch
cut their ratings on the stock.Investment banks cut their ratings
on HUL after the company reported Tuesday a lower-than-expected
growth of 15.67% in its net profit to Rs 8.71 billion as compared
to Rs 7.53 billion for the same period last year. Analysts on an
average had expected profit of Rs 9 billion.
Nomura downgrades HUL to Reduce from Neutral. Commenting on the rationale, Nomura said, "The company announced a phased-in rise in royalty rates to be paid to its parent company Unilever from 1.4% of net sales currently to 3.15% by FY18. The increase in FY14 alone is 50bps, and the rate will keep increasing progressively over the next few years. Second, HUVRâ™s tax rate is also moving higher over the next couple of years, which will impact profit growth. These changes lead to a 5-12% cut our FY13F-15F earnings forecasts. Moreover, given that HUVR has the slowest earnings growth in our coverage universe, we believe valuation multiples are also likely to correct over the next few months."
Bank of America Merrill Lynch has downgraded HUL to 'underperform' and reduced its target on the stock to Rs 441from earlier Rs 477. Citi has downgraded HUL to 'sell' and reduced its target to Rs 450 from Rs 494.
Shares of the companyare trading at Rs
459, down Rs 22.55, or 4.68% at the Bombay Stock Exchange (BSE) on
Wednesday at 9:59 a.m.The scrip has touched an intra-day high of Rs
459.50 and low of Rs 447.25. The total volume of shares traded at
the BSE is 780,848.In the earlier session, the shares lost 2.88%,
or Rs 14.3, at Rs 481.55. Currently, the stock is trading down
20.81% from its 52-week high of Rs 579.60 and above 22.37% over the
52-week low of Rs 375.10.
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