Hindustan Unilever (HUL), the maker of Lux soap, continues to wade through uneven movements in share price as couple of investors plan to exit from the company which has just scaled a landmark of Rs 5 lakh crore market capitalisation.
GlaxoSmithkline (GSK) and Horlicks will sell up to $3.4 billion (Rs 26,090 crore) worth of HUL shares through what could be India’s biggest secondary market block trades on Thursday, with the British drugmaker looking to monetise about 5.7% of HUL stock it had got after last year’s merger of GSK Consumer Healthcare and the country’s most valuable FMCG company. ET first reported about the potential deal on December 16.
Glaxo is seeking to benefit from the surge in HUL stock, which has climbed a fifth since the deal was announced a year ago.
Recently, HUL scaled a market capitalisation of Rs 5.08 lakh crore is almost half of its overseas parent Unilever.
The FMCG company is riding the change in earnings prospect and business outlook post Coronavirus outbreak.
The British-Dutch transnational consumer goods company co-headquartered in London, England, and Rotterdam, Netherlands, has withdrawn its outlook for the year after reporting sales were flat in the first quarter, despite an increase in demand for hygiene and in-home food products.
HUL rallied on the investor quest for safe haven demand. The risk averse investors pushed HUL’s valuation premium to a record high.
The key price-to-earnings (P/E) multiple is now nearly twice that of its industry peers — the highest in 17 years. At its current market capitalisation, HUL is now valued at nearly 77x its trailing 12-month net profit, against the industry’s average P/E of 43x. At around 3,300 basis points (bps), its valuation premium over the industry is nearly 6x its historical average of around 570 bps.
HUL’s premium valuation is attributable to its relatively faster earnings growth in the post-demonetisation period, and its superior capital efficiency.
This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.