The stocks of consumer goods companies oscillated between green and red to the finance minister’s proposal cutting customs duty on non-edible oil to 7.5%. Non-edible oil is a key raw material used in making soaps.
The stock of Hindustan Unilever (HUL) closed at Rs 560.25 or 0.04% higher on Monday after opening at Rs 560. The stock touched intra-day high of Rs 566 or 1.07%.
Analysts believe the stock was perhaps not reacting to the finance minister’s announcement as the consumer companies typically pass on the benefits to the end consumers. “One can expect HUL to lower the costs, so margins are not going to see any favourable impact on account of the cut in the customs duty,” said an analyst with a leading foreign brokerage.
“HUL’s soap revenues in FY13 stood at Rs 5,362 crore or 21% of the total revenues of R25,206.38 crore. The company’s current market share in the soap segment is 50%. However, all players in the soap segment could lower the price making this a non-event,” he added.
Among other major players in the soap industry, stocks of Wipro ended marginally down at 0.56% at R580.85 points, while shares of Godrej Consumer Products ended 1.48% higher at Rs 749.80.
At present, non-edible oil attracts duties of 10%, 12.5%, 15% or 20%, depending upon the type imported.
According to experts, slowdown in consumer spending remains a key concern for the HUL stock. “The Q3 results highlighted consumption slowdown, as HUL reported its lowest volume growth in the past 17 quarters,” Goldman Sachs analysts Puneet Jain and Aditya Soman said in a recent research report. The consumer goods player reported a net profit of Rs 1,062 crore, a 22% y-o-y rise.
In the current calendar year, the stock has shed 1.87%. The HUL scrip currently trades at 12-month forward price-to-earning ratio of 30.417. In the third quarter, HUL volumes grew at 4% y-o-y. According to the company management, the pre-election spending and monsoon failed to improve the demand.