Hindustan Unilever's strategy to prioritize growth over margins sparks bullish brokerage calls

Jefferies dismissed all short-term market concerns on HUL's margin strategy.

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Consumer staples bellwether Hindustan Unilever Ltd.'s shares will be in focus on April 25 amid the FMCG player's announcement to shift its strategy towards prioritising growth at the expense of margins, following its quarterly earnings update for March FY2025.

The management’s intention in lowering EBITDA margins range of 22–23 percent (down 100 basis points) is to dial up investments across all lines and not be a price versus cost adjustment.

For the quarter ended March, HUL'stocks standalone profit came in at Rs 2,493 crore, up 3.7 percent compared to the same quarter last year. Hindustan Unilever's standalone revenue rose 2.1 per cent to Rs 15,000 crore.

Brokerages retained their bullishness on the FMCG giant. "HUL has made a significant strategy shift, which implies near-term margin pain. This change led to a 4 percent correction in the share price in the previous session, triggered by concerns among ‘short-sighted’ investors and analysts," said international brokerage Jefferies. The broking firm retained a ‘buy’ rating on the stock and a target price of Rs 2,950 apiece.

"In FY26, we expect HUL to provide consumers better value via higher investments and building a stronger core—especially Lifebuoy, Glow & Lovely and Nutrition Drinks; allowing HUL to return to 4–5 percent volume," said Nuvama Institutional Equities. The brokerage maintained its 'buy' stance, with a price target of Rs 3,055 apiece.

Emkay Global voiced some concerns on HUL's inability to fully benefit from the improved show in part of the business as well as inconsistent performance in the segments. However, the broking house decided to maintain its 'add' rating, with a target price of Rs 2,400.

"In Q4, while the BPC segment showed improvement, performance in Home Care and Foods was weak. Revised near-term operating margin guidance signals HUL's aggressive intent to stimulate growth, especially in Beauty & Wellbeing," said Emkay.

HUL's segment-wise Q4 breakdown

Personal Care posted a 5 per cent rise in profit with low single-digit sales growth amid  pricing pressure. Within the segment, Bodywash grew in double digits, strengthening its market leadership. Non-hygiene products saw high single-digit growth, while skin cleansing reported low single-digit growth.

The Home Care segment contributed Rs 5,815 crore to the consolidated revenue, rising 2 per cent YOY, helped by  "outperformance" in premium fabric wash and fabric conditioners, the company said in an investor presentation. Its liquids portfolio also helped boost the sales.

Beverages saw low single-digit growth in tea, led by pricing, while coffee continued double-digit growth, maintaining momentum. The company retained value and volume leadership in tea.

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