Moneycontrol Bureau
Hindustan Unilever is likely to slash prices further, says JM Financial. The FMCG major has already implemented a 4-5 percent price-cut in soaps to pass on input cost benefits. However, that has now begun to 'trickle down, as higher-cost inventories are slowly exhausting', adds JM Financial.
The brokerage recently met HUL management. According to the management, there is a slight pick-up in demand condition across most major categories and in both rural and urban markets. Industry volume that has been declining over the past few quarters is also now flattish.
However, a delayed winter may spoil the game for HUL. The management is little worried that a late winter may impact sales of winter products, but premiumisation trend in toothpaste has been coming off quite significantly in recent months.
"Businesses are now beginning to realise the benefit of the fall in input costs, as higher cost inventories procured earlier are now beginning to get exhausted. We expect some price cuts to come through in the near future. These steps indicate HUL’s aggression to counter threat from unorganised players who generally get more competitive in a falling raw material cost regime," the management believes.
The company may retain a portion of the benefits from lower input costs to recoup a part of the margin lost during inflationary times.
Hindustan Unilever closed at Rs 797.80, up Rs 1.45, or 0.18 percent on the BSE.
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