Business
Disappointing earnings by HUL drags FMCG stocks sharply lower- The Week
Fast-moving consumer goods companies saw a sharp sell-off on Thursday, as earnings of Hindustan Unilever (HUL), the largest in the segment in the country, left investors disappointed.
HUL closed 5.8 per cent lower at Rs 2,502.95 on the BSE, a day after the maker of Surf detergent and Bru coffee reported a 4 per cent year-on-year drop in standalone second-quarter net profit. Its revenue also rose only 2 per cent, with company officials stressing moderating growth in urban markets. Earlier, Nestle India and Tata Consumer Products too had pointed to consumer spending woes in urban areas.
Against this backdrop, investors seemed to have lost some appetite for FMCG companies. On Thursday, Dabur, Godrej Consumer, Nestle, Hatsun, Colgate Palmolive, Varun Beverages, Marico, Emami and Heritage Foods among others declined 2-5 per cent. The BSE Sensex ended flattish, down 17 points or 0.02 per cent.
HUL has declined a little over 15 per cent over the past one month, compared with a 5.7 per cent decline in the Sensex.
ALSO READ: After Nestle India, Hindustan Unilever points to urban demand pressures hurting growth
“While rural market is seeing a gradual recovery, moderation in urban (also voiced by Nestle and Tata Consumer) has come as a negative surprise,” noted Mehul Desai of JM Financial Institutional Securities.
HUL, in particular, saw volumes de-grow in low-single digits in foods and refreshments as well as personal care segments.
“Demand environment is unlikely to see acceleration as gradual recovery in rural is offset by moderation seen in urban market (primarily in large cities),” said Desai.
In the backdrop of the weak growth in the July-September quarter earnings, analysts have cut their earnings estimates for HUL by 2 per cent to 4 per cent. However, not all is negative, said some analysts.
“The portfolio (home care, and beauty and wellbeing) that represents three-fifth of the sales and two-thirds of the EBIT (earnings before interest and taxes) is in good health, with topline growth in a high single-digit and margin expansion,” noted Nitin Gupta of Emkay Global Financial Services.
The recent correction in the stock factors in the near-term slowdown, he said.
Naveen Trivedi of Motilal Oswal Financial Services also pointed to the 7-8 per cent underlying growth in the core home care, beauty and wellbeing portfolio and opined out that with macro improvements, HUL can see “volume acceleration” in the ensuing quarters. The price hikes that the company is taking to offset inflation in certain segments, should also support revenue growth, he added.
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2024 is turning out to be a solid year for the global semiconductor industry, driven by multiple catalysts. These include the booming demand for chips that can manage artificial intelligence (AI) workloads, a turnaround in the smartphone market’s fortunes, and a recovery in the personal computer (PC) market.
These factors explain why the global semiconductor industry’s revenue is expected to jump 16% in 2024 to $611.2 billion, according to World Semiconductor Trade Statistics (WSTS). That points toward a nice turnaround from last year, when the semiconductor industry’s revenue fell 8%. Even better, the semiconductor space is expected to keep growing in 2025 as well, with WSTS projecting a 12.5% increase in the industry’s earnings to $687.4 billion next year.
More specifically, WSTS predicts a whopping 25% increase in the memory market’s revenue in 2025 to $204.3 billion. As it turns out, memory is expected to be the fastest-growing semiconductor segment next year as well, following an estimated jump of almost 77% in this segment’s revenue in 2024.
There’s one company that could help investors tap this fast-growing niche of the semiconductor market next year: Micron Technology (NASDAQ: MU). Let’s look at the reasons why buying this semiconductor stock could turn out to be a smart move right now.
WSTS isn’t the only forecaster expecting the memory market to surge higher next year. Market research firm TrendForce estimates that the sales of dynamic random access memory (DRAM) could jump 51% in 2025, while the NAND flash storage market could clock 29% growth. Both these markets are expected to reach record highs next year.
The growth in these memory markets will be driven by a combination of strong demand and improved pricing. TrendForce is forecasting a 35% year-over-year increase in DRAM prices next year, driven by the increasing demand for high-bandwidth memory (HBM) that’s used in AI processors, as well as the growth in DRAM deployed in servers. Meanwhile, the growing demand for enterprise-class solid-state drives (SSDs) and the growth in smartphone storage will be tailwinds for the NAND flash market.
These positive trends explain why Micron is set to begin its new fiscal year on a bright note. The company’s revenue in fiscal 2024 (which ended on Aug. 29) increased 61% year over year to $25.1 billion. The company posted a non-GAAP (generally accepted accounting principles) profit of $1.30 per share, compared to a loss of $4.45 per share in fiscal 2023, driven by a big jump in its operating margin on account of recovering memory prices.
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Tech pioneer Intel (INTC) has seemingly missed out on the artificial intelligence boom — and part of it can reportedly be traced back to a decision not to buy the chipmaker at the center of it all almost two decades ago.
Intel’s former chief executive Paul Otellini wanted to buy Nvidia in 2005 when the chipmaker was mostly known for making computer graphics chips, which some executives thought had potential for data centers, The New York Times (NYT) reported, citing unnamed people familiar with the matter. However, Intel’s board did not approve of the $20 billion acquisition — which would’ve been the company’s most expensive yet — and Otellini dropped the effort, according to The New York Times.
Instead, the board was reportedly more interested in an in-house graphics project called Larrabee, which was led by now-chief executive Pat Gelsinger.
Almost two decades later, Nvidia (NVDA) has become the second-most valuable public company in the world and continuously exceeds Wall Street’s high expectations. Intel, on the other hand, has seen its shares fall around 53% so far this year and is now worth less than $100 billion — around 30 times less than Nvidia’s $3.4 trillion market cap.
In August, Intel shares fell 27% after it missed revenue expectations with its second-quarter earnings and announced layoffs. The company missed profit expectations partly due to its decision to “more quickly ramp” its Core Ultra artificial intelligence CPUs, or core processing units, that can handle AI applications, Gelsinger said on the company’s earnings call.
And Nvidia wasn’t the only AI darling Intel missed out on.
Over a decade after passing on Nvidia, Intel made another strategic miss by reportedly deciding not to buy a stake in OpenAI, which had not yet kicked off the current AI hype with the release of ChatGPT in November 2022.
Former Intel chief executive Bob Swan didn’t think OpenAI’s generative AI models would come to market soon enough for the investment to be worth it, Reuters reported, citing unnamed people familiar with the matter. The AI startup had been interested in Intel, sources told Reuters (TRI), so it could depend less on Nvidia and build its own infrastructure.
CryptoCurrency
Microsoft Urges Shareholders to Vote Against a Proposal to Assess Bitcoin as a Diversification Investment: Filing
The National Center for Public Policy Research, a conservative think tank, has notified shareholders of Microsoft that it intends to propose a Bitcoin Diversification Assessment at the company’s annual meeting on Dec. 10, a filing shows.
In a Schedule A filing with the U.S. Securities and Exchange Commission on Thursday, Microsoft laid out issues that will be discussed at the company’s next shareholder meeting. One of the proposals suggests that the tech firm should look into bitcoin to hedge against inflation and other macroeconomic influences.
The board recommends shareholders to vote against this proposal, the filing reveals, arguing that Microsoft already “carefully considers this topic.”
“Past evaluations have included Bitcoin and other cryptocurrencies among the options considered, and Microsoft continues to monitor trends and developments related to cryptocurrencies to inform future decision making,” according to a company statement in opposition of the proposal.
“As the proposal itself notes, volatility is a factor to consider in evaluating cryptocurrency investments for corporate treasury applications that require stable and predictable investments to ensure liquidity and operational funding. Microsoft has strong and appropriate processes in place to manage and diversify its corporate treasury for the long-term benefit of shareholders and this requested public assessment is unwarranted,” it said.
The National Center for Public Research, a member of Project 2025 argued that bitcoin is an “excellent, if not the best, hedge against inflation,” and that at minimum, companies should invest 1% of its total assets into the cryptocurrency.
Microsoft’s top shareholders include Vanguard, BlackRock and State Street.
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