Hindustan Unilever downgraded to 'Hold' by MarketsMOJO, but remains a dominant force in FMCG sector

Hindustan Unilever, one of the largest FMCG companies in India, has recently been downgraded to a 'Hold' by MarketsMOJO on July 30, 2024. This decision was based on various factors such as the company's strong long-term fundamental strength, healthy growth in net sales, and low debt to equity ratio. However, the stock is currently in a mildly bullish range and has multiple bullish indicators such as MACD, Bollinger Band, and KST.
One of the reasons for the downgrade is the high institutional holdings of 26.03%, which indicates that these investors have better resources and capabilities to analyze the company's fundamentals compared to retail investors. With a market cap of Rs 6,37,926 crore, Hindustan Unilever is the largest company in the FMCG sector, constituting 30.23% of the entire sector. Its annual sales of Rs 62,107 crore make up 18.20% of the industry.

In terms of financial performance, the company's results for the quarter ending June 2024 were flat. Its return on equity (ROE) stands at 20.1, which indicates a very expensive valuation with a price to book value of 12.3. However, the stock is currently trading at a fair value compared to its average historical valuations. Over the past year, while the stock has generated a return of 4.09%, its profits have fallen by -0.2%.

In the last year, Hindustan Unilever has underperformed the market, with a return of 4.09% compared to the market's (BSE 500) return of 37.71%. This could be a cause for concern for investors, leading to the downgrade to a 'Hold' rating. However, the company's strong fundamentals and market dominance in the FMCG sector make it a stock worth keeping an eye on for potential future growth.