Instead of Research Leading the Stock Price movement, it always follows which makes it good for nothing. [Sometimes I feel that these Reports are Published purposely a day or two after the necessary price movement in the stock / Or after building favorable F & O Positions . We are doing Historical Research on the same and the findings will be published very soon here] Hindustan Unilever stock has corrected more than 15% and then the Analysts published their views. Here is why the stock has crashed when the market has hit a new 12 month high.
JP Morgan Said,
Competition in laundry space has intensified further with P&G announcing another round of price cuts (20- 50%) recently for its Tide and Tide Naturals brand (powder and bars) in response to c30% price cuts initiated by HUL for its Rin brand. We believe HUL would retaliate with more price cuts (possibly for Wheel brand) in order to defend its market share in discount segment. The price reductions are being accompanied by higher trade promotions and brand investments which will keep A&P spends for HUL at elevated levels. A much bigger threat could emerge if P&G decides to follow a similar strategy in premium detergents and shampoos where it has a sizeable presence.
Goldman Sachs Said,
The Indian laundry detergents segment remains competitive with Procter & Gamble Home Products (P&G) increasing grammage for its brand Tide Naturals by 25% (Livemint, March 10). This follows on from P&G’s launch of Tide Naturals in December at a discount to its Tide brand, after which Hindustan Unilever cut prices in January for its competing Rin brand (by 29% to Rs50/kg from Rs70/kg) and also for Surf Excel Blue variants by 8%- 11%.
We revise our 12-month target price to Rs236 from Rs247, based on 22X FY11E EPS. HUL is currently trading at FY11E P/E of 21X, which in our view is not expensive at about one standard deviation below its long-run 12-m forward average P/E of 25X.
Does it remind you of the Indian Police arriving in Bollywood long after the action has come to an end 🙂