Citi has downgraded the shares of Hindustan Unilever from 'neutral' to 'sell' after the company announced earnings.

Citi has also raised target price to Rs 345 from Rs 330. "A decelerating top line implies higher probability of margin pressures in subsequent quarters," Citi said in a note. It said that the fall of 7 per cent in advertising and promotional spending might put pressure on margins.

The company has said that there is growing competitive and cost pressures. This has raised investor concerns over the company's ability to maintain high volume growth in the coming quarters.

The shares of the company fell 1.87 percent to Rs 379.75 this morning even as it posted higher-than-expected 18 percent rise in third-quarter net profit. India's largest consumer goods maker's profits rose to Rs 754 crore for the third quarter ended December 31, 2011 from Rs 638 crore in the same period previous year.

The company's net sales increased 16 per cent to Rs 5,853 crore in the quarter compared to Rs 5,027 crore int eh same period previous year. The company said that its rural reach and the growing number of urban outlets have boosted growth in the December quarter.

HUL's domestic business grew 17 per cent in the quarter. Soaps and detergents grew by 21 per cent while personal products grew 14 per cent. Hair care recorded high growth due to Dove, Clinic Plus and Clear, however, oral care registered a modest growth in a competitive environment.