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Published on 1/04/2020 2:28:42 PM | Source: ICICI Direct

Gladiator Stocks – Hindustan Unilever Ltd By ICICI Direct

Posted in Broking Firm Views - Short Term Report| #Hindustan Unilever Ltd #FMCG #Trading Report #ICICI Direct

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Hindustan Unilever (HINLEV): Elevated buying demand at key support threshold augurs well for next leg of up move…

* The share price staged a strong pullback after finding support from key support of | 1800. This indicates elevated buying demand, making us confident of believing the stock would endure its relative outperformance. Hence, this offers a fresh entry opportunity to ride the next leg of up move towards | 2510 in coming months

* The share price has been relatively outperforming the benchmarks throughout in the past three month’s corrective phase as the Nifty is down 30% from life-time high of 12430 whereas the stock is merely 5% away from its life-time high of 2308, indicating inherent strength, in turn signifying a robust price structure

* In the secondary corrective phase of February–March, the stock found support from key support threshold of 1800 as it is confluence of:

* as per change of polarity concept 2018 high of | 1870 has now acted as a strong support

* 80% retracement of previous major rally July 2019 – February 2020 (| 1660 – 2308), at | 1788

* we expect the stock to resolve higher and head towards | 2510 as it is 138.2% external retracement of last corrective phase (| 2308 to 1757), placed at | 2518

 

Fundamental View: Hindustan Unilever (HINLEV)

* HUL’s products, which reach nine out of 10 households in India, would continue to witness uninterrupted demand as most of its product categories i.e. soaps, detergents, toothpastes, tea/coffee would be in uppermost demand for a quarter or so resulting in robust results for the company

* Even though soaps/detergents categories are almost fully penetrated in India, we expect per capita increase in its consumption on account of sudden shift towards maintaining hygiene in the backdrop of spread of Covid-19. HUL’s Lifebuoy sanitiser product has already seen superior demand over last month. We expect this to continue, going forward also. HUL is likely to sustain robust revenue growth and strong operating margins

* The company would continue to command a premium to peers being the leader in the category. However, with recent spurt in stock prices, there is little headroom for further growth. Hence, we change our recommendation from BUY to HOLD with a target price of | 2310/share

 

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