Key things to watch for in Hindustan Unilever Q4 earnings

Amid what has been quite a volatile year for corporate India in general, FMCG companies have managed to put a strong performance. Stocks of many consumer goods majors have outperformed the broader market by a wide margin, as investors bet on defensive picks. Hindustan Unilever , the biggest of the lot, will announce its fourth quarter results on Tuesday.

Analysts expect the company to report strong earnings growth for the Jan-March quarter, helped by steady uptick in volumes and price hikes taken during the quarter to offset some of the margin pressures. Over last few years, FMCG companies have been expanding distribution in rural areas, where growth has been faster than in the cities and there are little signs of slowdown yet.

"Expect 8% volume growth, 6% price increase to support steady topline growth," says Anand Mour of Ambit Capital.

Analysts expect HUL to report a 10-20% year-on-year net sales growth in the fourth quarter, while net profit growth will be higher at around 20-30%.

On the margin front it has been a mixed trend. While price of linear alkyl benzene (LAB) was at its peak in the fourth quarter, a key negative for HUL, soda ash prices were flat, points out Amnish Aggarwal of Motilal Oswal Securities.

Tea and coffee prices too saw a decline in the quarter, which should help the company, which makes Red Label, Taj Mahal Tea and Bru instant coffee, say V Srinivasan and Sourabh Taparia of Angel Broking.

Srinivasan and Taparia expect HUL's operating profit margins will be at 13.4% in Jan-March, up 162 bps from a year ago. Motilal Oswal sees the company's EBITDA margins at 14.3%.

Apart from price hikes, lower advertising spend due to lack of product launches in the quarter will be a major driver for margins, analysts say.

Look out for:

- Volume growth across key segments.

- Margins, especially in soaps and detergents, where competition remains strong.

- Any commentary on input costs, pricing and overall growth for the company and industry in fiscal 2013.

HUL shares closed at Rs 417.60, unchanged from Friday's close. The stock is up 2.5% since, Dec 30, significantly underperforming the broader CNX FMCG index, which has gained near 19% in the same period.