Earnings Outlook
Sluggish urban demand to weigh on Hindustan Unilever's net sales growth
This story was originally published at 14:26 IST on 22 April 2025
Register to read our real-time news.Informist, Tuesday, Apr. 22, 2025
By Anand JC
NEW DELHI – Hindustan Unilever Ltd.'s top line for the March quarter is expected to contract marginally due to sluggish demand in urban areas which will not be fully offset by recovery in rural demand. Price hikes by the company during the latest quarter will likely drive HUL's sales growth, if any. The company will detail its March quarter earnings Thursday.
HUL will likely report a net profit of INR 24.8 billion for the March quarter, according to an average of 15 analyst estimates. While the fast moving consumer goods-major's bottom line is expected to increase 3% year-on-year, it may drop 17% sequentially. Nirmal Bang Equities' estimate of INR 26 billion profit for HUL is the highest, while HDFC Securities' estimate of INR 24 billion is the lowest.
The net sales of HUL for the March quarter are expected to be INR 147.2 billion, as per consensus estimates, meaning a 1?cline year-on-year, and a sharper 4.5?ll sequentially. Among the 15 analysts, Motilal Oswal Financial Services Ltd.'s forecast of INR 156.8 billion is the highest. HUL reported a revenue of INR 148.6 billion for the March quarter of 2023-24 (Apr-Mar). YES Securities (India) Ltd. has forecast a revenue of INR 85.4 billion, an outlier among the 15 analyst estimates.
A persistent slowdown in general trade amid increasing competition from direct-to-consumer players and discounting by e-commerce and quick-commerce platforms likely affected HUL's top line, Centrum Broking Ltd. said in a note. Similar to the trailing quarters, growth in demand from rural areas continued to outpace that from urban areas in the latest quarter. Yet, while the rural market has remained stable, it did not see incremental acceleration in recovery, Prabhudas Lilladher said in a report.
The Surf Excel-maker's earnings before interest, taxes, depreciation, and amortisation for the March quarter is expected to be INR 35.7 billion – up 4% from a year ago, and 0.1% sequentially.
VOLUME IMPACT
Demand in India did not improve much in the March quarter, compared to the rest of 2024-25 (Apr-Mar). Growth in rural markets outgrew that of urban markets, general trade channels faced stiff competition from modern trade, and volume growth remained subdued. Despite a sequential respite, food inflation remained elevated compared to the base quarter, and this will impact HUL, Motilal Oswal said.
Most analysts have forecast 0-2% growth in volumes of HUL for the March quarter. Volume growth in the December quarter, September quarter, and the June quarter was flat, 3%, and 4%, respectively. In the base quarter, HUL's volume growth was 2%.
HUL hiked prices, cut prices, and adjusted grammages across categories to manage input cost increases in the March quarter. Nuvama Wealth Management Ltd. said in a note that HUL likely took a 2% price hike in the March quarter on an overall portfolio basis, with price hikes taken in the mid-December quarter flowing fully now into the company's earnings. Price of soaps and tea products were hiked, while grammages were increased in the homecare segment, analysts said.
Price hikes were offset by price cuts in detergents made by HUL, to pass on the deflation in raw materials such as crude oil-related inputs. Detergents made by the company include Rin, Sunlight, and Surf Excel. The price cuts likely resulted in tepid growth in the segment. The homecare segment likely grew 3.1% on year in the March quarter, compared to 5.4% in the December quarter, and 8% in the September quarter, Kotak Institutional Equities said.
HUL's gross margins likely declined in the March quarter due to inflation in palm oil and tea prices. Kotak estimates HUL's EBITDA margin for the March quarter to be 22.8%, down 30 basis points on year due to a 10 bps increase in royalty paid to the parent company, and an adverse operating leverage compared to a year ago. Some analysts expect a stable EBITDA margin reading due to cost saving initiatives undertaken by HUL, such as a cut in advertisement and promotional expenditure.
At 1422 IST, shares of HUL traded at INR 2,391 on the National Stock Exchange, up 1.7%. The company had reported its December quarter earnings on Jan. 22. Since then, its share prices have appreciated 1.5%.
The following are the Jan-Mar earnings estimates for Hindustan Unilever based on reports from 15 brokerage firms in descending order by the estimated net profit:
|
Broking firms |
Net Profit |
Net Sales |
EBITDA |
|
(in INR million) |
(in INR million) |
(in INR million) |
|
|
Nirmal Bang Equities Pvt Ltd |
153489.00 |
25968.00 |
35415.00 |
|
IIFL Capital Services Ltd |
153105.00 |
25338.00 |
35845.00 |
|
Motilal Oswal Financial Services Ltd |
156751.00 |
25261.00 |
36179.00 |
|
YES Securities (India) Ltd |
85352.00 |
25158.00 |
43,718.00 |
|
Sharekhan Ltd |
153150.00 |
25110.00 |
|
|
Morgan Stanley |
149471.00 |
25051.00 |
34908.00 |
|
Centrum Broking Ltd |
154080.00 |
24920.00 |
35700.00 |
|
Nuvama Wealth Management Ltd |
149869.00 |
24912.00 |
35040.00 |
|
Kotak Institutional Equities |
151122.00 |
24448.00 |
34466.00 |
|
Systematix Shares and Stocks (India) Ltd |
152069.00 |
24433.00 |
35,067.00 |
|
PhillipCapital (India) Pvt Ltd |
151077.00 |
24313.00 |
34642.00 |
|
Prabhudas Lilladher Pvt Ltd |
153045.00 |
24284.00 |
35461.00 |
|
Elara Securities (India) Pvt Ltd |
150530.00 |
24240.00 |
34710.00 |
|
JM Financial Institutional Securities Pvt Ltd |
148401.00 |
24129.00 |
34612.00 |
|
HDFC Securities Ltd |
146930.00 |
23960.00 |
34350.00 |
|
Average |
147229.40 |
24768.33 |
35,722.36 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Ashish Shirke
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