ICICI Direct analyses HUL's Q3 result; Says buy at Rs 405

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ICICI Direct analyses HUL's Q3 result; Says buy at Rs 405

Analysts on average were expecting HUL to report a net profit of Rs 710 crore on revenue of Rs 5,875 crore in October-December. Sanjay Manyal, research analyst at ICICI Direct tells CNBC-TV18 that the results were inline with his expectations.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ News and Notices about HUL See interviews with HUL Management See what other Experts & Brokerages are saying about HUL See previous Results of HUL HUL BSE | NSE 29/05/12 Are Mutual Funds betting on HUL?

India's largest FMCG company, Hindustan Unilever reported its third quarter earnings results. HULs net profit rose 18% YoY to Rs 753.81 crore while its net sales grew to Rs 5,853 crore, up 16.4% YoY.

Analysts on average were expecting HUL to report a net profit of Rs 710 crore on revenue of Rs 5,875 crore in October-December.

Sanjay Manyal, research analyst at ICICI Direct tells CNBC-TV18 that the results were inline with his expectations. "Volumes might be slowing down from here but margins remain excellent," he adds.

Below is an edited transcript. Watch the accompanying video for more.

Q: The management said - volumes are at 9.1% compared to 9.8% in the last quarter. The margins were excellent - 230 bps higher. What were the key takeaways that you got?

A: The street will take the results quite positively because the volume growth has been sustainable. From the last 4-5 quarters, 9% plus kind of volume growth is pretty decent. When the company is pretty comfortable about the volume growth, they have taken the price increase specifically in soaps and detergent last quarter and now the focus is obviously on margin expansion. They have delivered this quarter as far as margins are concerned. Overall, the result seems to be pretty decent.

Q: Do you expect HUL to maintain 9% volume growth? For the fourth quarter what would be the expectation?

A: They have maintained volume growth despite the price increase last quarter. So there is no reason to believe they would not be able too. We have heard the management say that in soaps and detergents, probably the volumes have been slowing down. They probably can see that but the overall volumes have been maintained at 9% despite the price increase. So there is no problem as far as volume growth is concerned.

Q: At Rs 405 is it a buy?

A: It is a buy certainly at this point in time though the return probably would be a bit less because it has run up quite bit in the last 15-20 days. It has outperformed the overall FMCG index in the last six months as well. It is still a buy but returns will be a bit less than what it would have been six months back.