Shares of FMCG giant Hindustan Unilever Ltd. (HUL) slipped in trade on January 23, after the consumer staples reported an underwhelming earnings show for the October-December quarter (Q3) of the current financial year (FY25).

At 9.20 am, shares of HUL sank over 3.2 percent to quote Rs 2,267.5 on the NSE.

Hindustan Unilever reported a 19 percent rise in consolidated net profit for the third quarter ending December 31. The company reported a consolidated net profit at Rs Rs 2,989 crore versus up from Rs 2,508 crore mainly due to the exceptional gain realized from the divestment of its Pureit business.

Meanwhile, consolidated revenue stood at Rs 15,559 crore in the quarter ending December 31, up from Rs 15,259 crore in the same period last year.

Brokerages slashed their target price on HUL shares, as volume growth lagged expectations amid a weak product mix.

For the quarter, demand recovery continued to witness a delay, with urban consumption reeling

under pressure. The volume growth remained flat, coming under the Street's forecast, as the tea and soap segments saw a five percent volume dip. However, after many quarters, HUL undertook positive pricing action, hiking prices by two percent.

The volumes for the home care segment grew in high single digits, led by strong volume-led growth in fabric care and household care. The segment continues to see margin expansion, with a 10 percent on-year EBIT growth. Hair care, oral care, packaged foods and non-winter

portfolio grew in mid-single digits.

HUL will focus on volume-led growth going ahead, undertaking various initiatives to strengthen its core portfolio, expand its total addressable market, drive premiumization, and transform its Beauty & Wellbeing (B&W) and Foods portfolio.

On the margin front, Goldman Sachs noted that the EBITDA margin came in lower despite falling advertisement and promotional spending.  CLSA believes that the firm's margins are likely to remain under pressure, as HUL focuses on growth, especially in the B&W segment.

Overall, the near-term demand is likely to remain weak, as lagging urban growth weighs on the consumer staples player's topline growth. This can be seen as consumers downtrade to smaller packs and rising sachetisation, as the urban slowdown has worsened.  According to international brokerage Investec, this signals weaker demand for the FMCG sector as a whole.

Should you buy, sell, or hold HUL shares?

Brokerages have mixed ratings on the FMCG giant. However, following the earnings report, most broking houses have slashed their target price on Hindustan Unilever shares, as they believe near-term performance will remain muted due to urban weakness.

"We see the weak near-term outlook bearing down on valuations, but relatively better execution is likely to aid HUL in its medium-to-long term performance," said Emkay Global, reiterating its 'buy' rating, with a price target of Rs 2,675 per share.