Below are the price targets for Hindustan Unilever Limited (HINDUNILVR.BO) over the next 10 years.
Our price targets for (HINDUNILVR.BO) in 2020 are:
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2,279.50 (overvalued)
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1,692.00 (fair value)
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1,104.50 (undervalued)
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728.50 (extreme undervalue)
The valuation targets for Hindustan Unilever (HINDUNILVR.BO) are based on a dividend growth rate of 7% which is derived from one half the average dividend growth from 1999 to 2020 (intentionally excluding 1998) and applied to Edson Gould’s Altimeter. A graphical representation of the overvalued, fair value, and undervalued levels are below.
The above Altimeter translates into the following undervalued and overvalued ranges since 1998:
10-Year Targets
Observations
Hindustan Unilever (HINDUNILVR.BO) has an interesting pattern of dividend increases. At the points indicated in the chart below (2005, 2010, and 2016) we have also put into the red circles above.
What is the importance of these red circles and 2005, 2010, & 2016? They seem to coincide with a shift higher in the stock price, almost as in a new plateau. The point of the Altimeter is to reflect the over/undervaluation range of a given stock based on the history of dividend payments.
Currently, the Altimeter indicates that Hindustan Unilever is not undervalued. This doesn’t mean sell, as the point of compounding of income requires holding a position as long as possible.
One possible scenario is that Hindustan Unilever climbs all the back to the 1999/2000 levels in the Altimeter. This implies prices of:
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3,384 (8/4/1999)
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3,807 (1/26/2000)
However, the tendency of established dividend paying companies is that the rate of dividend growth slows over time, as indicated in the red descending line of the Year over Year Rate of Change chart. This is a situation worth watching as it develops.
Our goal is the accumulate at or below the undervalued levels and hold and compound at overvalued levels.
see also:
- Work Smart, Not Hard (The Power of Compounding)
- ITC Limited 10-Year Targets
- More 10-Year Targets