Shares of leading consumer goods companies such as Hindustan Unilever Ltd (HUL) and Godrej Consumer Products are in focus as the Indian economy is attempting a recovery amid the ongoing global slowdown and rate hikes to curb rising inflation. While HUL is a subsidiary of the renowned British multinational consumer goods firm Unilever, Godrej Consumer Products is an arm of the Godrej Group. Shares of the two companies are among the widely tracked ones in the consumer goods space with potential to generate decent returns in a volatile market.
In 2022, HUL stock has gained 10.24 per cent against a mere 0.08 per cent rise in Sensex. On the other hand, Godrej Consumer shares have plunged 14 per cent during the same period.
In the last one year, HUL shares have dipped 1.79 per cent and Godrej Consumer stock has lost 19.79 per cent during the period.The fast moving consumer goods (FMCG) shares have weathered the slowdown blues and market volatility with the BSE FMCG index zooming 2,038 points or 14.76 per cent on a year-to-date basis. In a year, the index has gained 3.56 per cent or 545 points. The Nifty FMCG index too has gained 15.21 per cent this year and climbed 4.23 per cent in a year, signifying the ability of the sector to outperform in volatile markets.
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In the current trading session, HUL stock gained 0.92 per cent to Rs 2,599 against the previous close of Rs 2,575. Market cap of HUL stood at Rs 6.10 lakh crore. The large cap stock has been gaining for the last two days.
Godrej Consumer stock too was trading 0.08 per cent higher at Rs 833.75 against the previous close of Rs 833.05. Market cap of the firm stood at Rs 85,262 crore.
Here's a look at how the two stocks stand against each other and which one can be a better pick.
Abhijeet from Tips2trade said, "In a highly volatile global market which has seen several sectors underperforming, FMCG sector has remained relatively steady including stocks like HUL and Godrej Consumer. Fundamentally & technically, HUL looks stronger than Godrej consumer with better margins & return ratios as well. Godrej consumer needs to close above Rs 840 on daily charts to buy for targets of Rs 920- Rs 960 in the near term. HUL has strong support at Rs 2510 and buying should be initiated only near this support. Immediate resistance is at Rs 2,610."
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Jitendra Upadhyay, senior Equity Research Analyst at Bonanza Portfolio said, "HUL is the leader in major of its product portfolio with an excellent product development strategy, product innovation and strong distribution reach. More than 75 per cent of products gained volume and value market share in FY2022. HUL's 16 brands with over Rs 1,000 crore revenue in FY22, while two brands have revenues of above Rs 5,000 crore in FY22, raw material inflation stood at peak level in Q1FY2023. With a recent correction in the key input prices, the raw material inflation is expected to cool off from H2FY2023. This will help operating profit margin improve going forward. HUL has started to pass on benefit of raw material cost to drive volumes improve in latest quarter."
Arijit Malakar, Head of Research - Retail, Ashika Group said, "As palm oil and other raw materials turns relatively cheaper, both HUL and Godrej consumer will get the benefit. However, both the companies have passed on the lower prices to customers by reducing the prices of popular soap brands which will result in higher volume growth. HUL is a better investment opportunity than Godrej Consumer given its strong parentage, wide portfolio of products, market leader in maximum products and strong distribution network. On other hand, tepid performance from Indonesian markets continue to weigh on the overall performance of Godrej Consumer. Soft demand from rural markets compared to urban markets will continue to impact the financial performance of Godrej Consumer in near term."
In a report dated September 28, 2022, financial services firm Motilal Oswal Financial Services said Godrej Consumer Products remained among the top picks in the staples space.
"As investments by the new CEO are aimed at boosting growth in the high margin, high returns on capital employed domestic business, its medium-term earnings growth outlook remains strong, Motilal Oswal said.
"Valuations, at 37.5 times September'24E EPS, are attractive, given the potential earnings compounded annual growth rate (CAGR) of 16 per cent over FY22-24. We maintain our Buy rating with a target price of Rs 1,075," it added.