ITC vs HUL: Which stock is a better pick in volatile market?

Shares of leading consumer goods companies such as Hindustan Unilever Ltd (HUL) and ITC have shrugged off market volatility and clocked double-digit returns for investors this year. While HUL has clocked returns of 10 per cent, the defensive ITC stock turned the tables and delivered 52.43 per cent returns in 2022. In fact, the ITC stock hit its all-time high of Rs 349.50 on September 23, 2022, rising 60 per cent from the December 31 closing of Rs 218.05 on BSE. 

The ITC stock has gained 26.61 per cent in a year, signifying increasing investor interest on the counter during the period in which Sensex tumbled 4.41 per cent. 

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On the other hand, HUL stock has fallen 0.93 per cent as investors booked profit amid highly volatile market in the last one year. The fast moving consumer goods (FMCG) shares have weathered the slowdown blues and market volatility with the BSE FMCG index zooming 2,228 points or 16.17 per cent on a year-to-date basis. In a year, the index has gained 4.62 per cent or 706 points. The Nifty FMCG index too has gained 16.07 per cent this year and climbed 4.95 per cent in a year. 

In the current trading session, HUL stock gained 1.66 per cent to Rs 2,635 against the previous close of Rs 2591. Market cap of HUL stood at Rs 6.19 lakh crore. The large cap stock has been gaining for the last three days. 

ITC stock too was trading 1.73 per cent higher at Rs 338.05 against the previous close of Rs 332.30. Market cap of the firm stood at Rs 4.19 lakh crore. 

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Here's a look at how the two stocks stand against each other and which one can be a better pick. 

Abhijeet at Tips2trade said, "After a good quarter where FMCG stocks have given decent returns compared to the other sectors, a slight correction was expected as seen in both HUL and ITC. HUL needs to close on daily charts above  Rs 2,625 for targets of  Rs 2,740-2,880 in the near term. Rs 2420- Rs 2500 will be great levels for investors to accumulate for the above targets. Similarly, ITC needs to close above  Rs 337 to move up to  Rs 360-395 in the near term.  Rs 310-315 will be great levels for investors to buy in the long term."

Jitendra Upadhyay, Sr. Equity Research Analyst, Bonanza Portfolio Ltd is bullish on ITC stock with a target price of Rs 390. 

"ITC's cigarette volumes crossed pre-covid levels supported by a normalising macroeconomic situation and enhanced product availability. Annual consumer spend in FMCG crossed Rs 24000 crore with exports to over 60 countries and products reaching 200 mn households (versus 150 mn in FY21). ITC delivered a resilient performance across all segments. Agri grew 29% YoY for the year, led by strong exports while paperboard also retained its leadership. ITC can comfortably pass any tax hikes to customers by raising prices. Business recovery in cigarette business has been better than expected while hotel segment recovery is likely to be on time. ITC's cigarette business allows the company to have a consistent strong cash flow (FY17-22 FCF CAGR 12%, FY22 FCF Rs 14,977 crore) which should continue to help FMCG business, good management, high free cash flow yield, high dividend yield and strong business moat that gives confidence to call it a high conviction buy at inexpensive valuation. In light of benign taxation, inexpensive valuations (22x FY24E EPS), we recommend a BUY rating on the stock with a TP of Rs 390, implying an upside potential of 17% from the CMP of Rs 332," said Upadhyay. 

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On HUL, Upadhyay 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% of products gained volume and value market share in FY2022. HUL's 16 brands with over Rs 1,000 crore 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."