HUL Stock Surges as ICICI Securities Upgrades to Buy on GST Growth

CONSUMER-PRODUCTS
Whalesbook Logo
AuthorAnanya Iyer|Published at:
HUL Stock Surges as ICICI Securities Upgrades to Buy on GST Growth
Overview

ICICI Securities has upgraded Hindustan Unilever Ltd (HUL) to 'Buy' from 'Add', predicting GST rate cuts will create a structural advantage. The brokerage sees strong volume resurgence driven by improved price elasticity in personal care products and affordability of premium goods. This upgrade suggests sustained growth potential for HUL from FY27.

GST Catalysed Growth

ICICI Securities is betting on tax rationalization to translate into lasting competitive advantages for Hindustan Unilever Ltd (HUL). The brokerage firm cited a strong conviction that regulatory tailwinds from Goods and Services Tax (GST) rate cuts are evolving into a structural competitive edge for the fast-moving consumer goods (FMCG) giant.

Unlocking Price Elasticity

Analysts Manoj Menon, Dhiraj Mistry, Ashutosh Joytiraditya, and Akshay Krishnan highlighted a clear resurgence in volumes. This uplift is significantly driven by improved price elasticity in personal care products. They believe GST-led price corrections have unlocked consumer demand, setting the stage for sustained growth from fiscal year 2027 onwards.

Premiumisation and Value

The brokerage identified four key growth drivers. First, demand for large-pack units in personal care has responded positively to lower prices post-GST cuts. Consumers are observed to be increasing consumption or opting for larger pack sizes, particularly in discretionary items like shampoos. Second, reduced prices are enhancing the affordability of premium products, encouraging consumers to trade up from mass-market brands. This trend is notably benefiting HUL's extensive portfolio across various categories, with early signs appearing in personal wash segments.

Strategic Channel Focus

Third, a sustained volume increase is anticipated, aided by grammage improvements in low-unit packs (LUPs) and price reductions in larger packs. This improved value proposition, especially in rural markets, can restore consumption frequency among lower-income consumers. Fourth, a renewed emphasis on the quick commerce (QC) channel is expected to bolster both growth and profit margins through aggressive promotions and a favorable premium product mix on these platforms. HUL's discretionary portfolio is now showing favorable price elasticity, unlike core food staples, paving the way for operating leverage and potential EBITDA margin expansion.

Disclaimer:This content is for educational and informational purposes only and does not constitute investment, financial, or trading advice, nor a recommendation to buy or sell any securities. Readers should consult a SEBI-registered advisor before making investment decisions, as markets involve risk and past performance does not guarantee future results. The publisher and authors accept no liability for any losses. Some content may be AI-generated and may contain errors; accuracy and completeness are not guaranteed. Views expressed do not reflect the publication’s editorial stance.