Merrill Lynch downgrades HLL owing to lower demand

‘‘Dull earnings growth coupled with poor monsoons further diminishing earnings upside, at least in the medium term, leads us to downgrade our intermediate term recommendation to neutral,’’ it justified.

While Merrill Lynch has maintained its view that HLL is a high quality company, however, with tougher business environment and a substantial 137 per cent premium to the Sensex, it believes that the stock will continue to underperform, despite it already having underperformed by 10 per cent in the past six months.

The report noted that while competitive pressures remain stiff, the onslaught of low priced regional competition continues. It is believed that competitive pressures for HLL will remain relatively high, with recovery in consumer demand likely to be pushed further due to poor monsoons. HLL derives over 40 per cent of its turnover from the rural market.