Major FMCG company Hindustan Unilever Ltd. saw a 9 per cent increase in shares, closing at year-high levels on Wednesday, June 5, as investors flocked to defensive stocks in the face of extreme market volatility following the results of the Lok Sabha elections.
The stock surged higher for the third straight day, starting at Rs 2,533.55 and soaring to a day's high of Rs 2,723.95 per share on NSE, rising an additional 9 per cent.
On July 7, 2023, HUL shares reached a 52-week high of Rs 2,769.65. On April 16, 2024, HUL shares fell to a 52-week low of 2,172.05 per share. Since then, the stock has increased by about 23 per cent.
Unexpepcted Lok Sabha Results
The unexpected result of the 2024 Lok Sabha elections on June 4 led to a sharp one-day increase in HUL shares of 9 per cent, the highest since April 2020.
Expecting strong results, investors flocked to defensive stocks like FMCG because they thought the new government would concentrate on increasing consumption, particularly among rural and bottom-of-the-pyramid consumers.
According to experts, a few businesses have been signaling a rise in demand from rural areas, which is good news for market leaders like HUL. They also anticipate that HUL's growth will pick up steam in the current fiscal year.
On June 5, gains ranging from 3 to 5 per cent were observed in other FMCG stocks, such as Tata Consumer, ITC, Dabur, and Nestle India which also saw strong investor traction.
Sluggish performance
The returns on HUL shares in the previous year were lower than those of the broader NIFTY index. In the last year, the stock has returned negatively compared to a roughly 19 per cent increase in the benchmark 50-issue stock index.
HUL shares have returned marginally this year compared to the Nifty index's rise of more than 2 per cent. But in the last month, the stock has increased by about 20 per cent as a result of higher market volatility brought on by the Lok Sabha elections.
The company's significant growth and margin headwinds were the cause of the underperformance in the previous year. HUL's growth figures were harmed in past quarters by a slackening in rural demand.
Hindustan Unilever's Financials
The FMCG giant revealed that its profit after tax decreased by 2 per cent to Rs 2,561 crore in the March quarter of FY24, from Rs 2,601 crore in the same quarter the previous year.
Compared to Rs 3,574 crore in the same quarter last year, the earnings before interest, tax, depreciation, and amortization (EBITDA) decreased by 1% to Rs 3,535 crore in Q4FY24. In Q4FY24, the EBITDA margin was 23.5 per cent, which was 40 basis points lower than in Q4FY23.
In Q4FY24, total sales increased slightly to Rs15,041 crore. The total sales for FY24 increased by 2 per cent to Rs 60,966 crore.
