Analyst Concall
EBITDA margin guidance of 22-23% only for near-term - HUL
This story was originally published at 19:10 IST on 24 April 2025
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--HUL: Committed to achieving double-digit EPS growth in long term
--HUL: Quick commerce growth not behind EBITDA margin guidance
--HUL: EBITDA margin may improve from 22-23% in latter part of FY26
--HUL: EBITDA margin guidance of 22-23% is only for 2-3 quarters
--HUL: Want to grow sunscreen category as it's high margin, high value pdt
--CONTEXT: Comments by HUL's mgmt in post-earnings analyst conference call
--HUL: Want to make Horlicks more relevant to today's needs
By Anand JC
NEW DELHI – Hindustan Unilever Ltd.'s guidance of 22-23% for earnings before interest, tax, depreciation, and amortisation margin is only for two or three quarters of 2025-26 (Apr-Mar) and could pick up in the latter part of the financial year, its management told analysts in a post-earnings conference call Thursday. HUL, which announced its Jan-Mar earnings on Thursday, had cut the EBITDA margins by 100 basis points from 23-24% projected in January.
The tweak in guidance is not a product of price-versus-cost adjustment by the company, but rather a dialling up of investments, the management said.
"There are basically two things which are happening. A, we have improving macroeconomic conditions, which will augur well for demand conditions and B, the amount of portfolio transformation that we are ready with to put investments behind. Both put together, in our view, now is the right time to dial up investments," the management said.
If there is continued improvement in the coming quarters, HUL said it will find space in its profit and loss statement to start dropping operating leverage in favour of profitability. In addition, if commodity prices remain where they are now, the company expects to see margins improve in the second half of FY26. HUL said the growth of the quick commerce channel was not behind the change in EBITDA margin guidance.
Foods Segment
In the company's nutrition drinks portfolio, HUL plans to revitalise offerings under the Horlicks brand, which it has owned since 2020. While the penetration of the brand has been good, the company wants to make it more contemporary, modern and relevant to today's needs, the management said. "We are going to double down on the adult nutrition business. We can do a better job there by doubling medical marketing, investing, and refocusing on high-growth parts of that portfolio," the company said.
Nutrition drinks are part of HUL's foods segment, which contributes a quarter to its overall revenues, the second highest. Beauty and well-being is the third-highest contributor to HUL's revenues, forming around 21% of HUL's March quarter revenue. Sunscreens are part of this segment, which the company wants to grow in the coming years as the product category remains under-penetrated in India, and is a high-margin, high-value product.
Quick Commerce
HUL has reorganised the availability of its products across channels to meet the diverse needs of consumers, the company said. Unilever's new Chief Executive Officer Fernando Fernandez recently said that while quick commerce currently accounts for 2% of the Surf Excel maker's total revenue, it could contribute 10-15% in the next 3-4 years. HUL said that organised trade, which includes modern trade like e-commerce and quick commerce, gives it better margins than general trade. This is because the company sells premium products through these channels.
The company has a differentiated assortment and portfolio design for quick commerce, making it a good market fit, the management said. "We sell a very discreet portfolio that is either way different by way of sizing, pricing, or even brands. At this point, we are trying to make sure that we win in that channel too," the company said.
From a medium-to-long-term perspective, the company retained its aim of providing double-digit earnings per share growth. In FY25, HUL's EPS grew 5%. For the guidance on EPS to materialise, the company said the fast-moving consumer goods market has to improve.
The FMCG bellwether reported a revenue of INR 152.1 billion for the March quarter, up just 2% on-year. The net profit for the quarter rose 3.6% on year to INR 24.9 billion. Shares of HUL ended Thursday's session 4.1% lower at INR 2,325.30 on the National Stock Exchange. The company announced the earnings during market hours. End
Edited by Saji George Titus
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