HUL Q3 adjusted PAT seen up 21% at Rs 710 cr

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Hindustan Unilever (HUL) is expected to report an adjusted profit after tax of Rs 710 crore in the October-December quarter of FY12, a growth of 21% as compared to Rs 586.7 crore in a year ago quarter.

Sales are seen going up by 16.9% to Rs 5,875 crore from Rs 5,027 crore year-on-year.

Operating profit margin is likely to be improving slightly at 14.6% in the quarter ended December FY12 versus 14.42% in the corresponding quarter of last fiscal.

Volumes

* Volume growth remains the centre of attention  

* Market looking for atleast 8.5% volume growth in Q3 

* But expectations have risen after Unilever Q4 concall

* Unilever management indicated double digit volume growth in India

* Double digit volume growth if delivered will be impressive

* Q3FY12 volumes have a high base of 13% growth in Q3 last year

* Street watching if Q2 beat was a one off restocking led surprise

HUL volume trend

-Q2FY12    9.8%
-Q1FY12    8.3%  
-Q4FY11    14%
-Q3FY11    13%
 
Margins

* Rupee depreciation continued to weigh on raw materials in Q3

* 2/3rd of HUL's inputs are dollar linked with 20% being direct imports

* But other margin levers are supportive in Q3

* Company took 5-6% price hikes in key soap/detergent brands last quarter

* Soap & detergent margins likely to have bottomed in Q3

* Also Q3 is seasonally strong for personal products due to winter

* Personal products a higher margin biz will aid overall margins

Bottomline

* Moderated advertisement spends would be EBITDA supportive

* Tax rate could be higher sequentially