HUL Q2 Preview | Net profit to jump 10% YoY, volume growth pegged at 5%

Hindustan Unilever (HUL) will announce its Q2FY23 results on October 21 and analysts expect the FMCG major to clock in 5 percent volume growth, despite subdued rural demand.

According to an average of estimates of brokerages polled by Moneycontrol, revenue is expected to rise 15 percent year-on-year (YoY) to Rs 14,678 crore. Net profit is expected to jump 10.5 percent from corresponding quarter of last fiscal to Rs 2,417 crore. Sequentially, net profit is likely grow by 5.6 percent.

Analysts at Kotak Institutional Equities expect continued strength in home care revenue growth on the back of price hikes in laundry products. They have also factored in improving trends in beauty and personal care (BPC) segment as skin cleansing products witnessed a pause in price hikes. Their forecast stands at 29 percent YoY growth for home care, 13.5 percent YoY growth for beauty and personal care and 9 percent YoY jump in the foods and refreshments portfolio.

Price hikes taken by the company was around 12 percent to combat inflation, said Nuvama Research, adding that it will help boosting HUL's revenue.

Despite the muted performance from rural markets, experts have pegged volume growth at 5 percent. Meanwhile, EBITDA margins are seen declining by 110 basis points YoY to 23.5 percent this quarter due to consumption of high-cost inventory. The decline in margins would have been steeper, had it not been for management’s cost rationalization on advertising and other discretionary spends, according to experts.

According to brokerage firm BNP Paribas, margins will improve from H2FY22 as crude and palm oil costs moderate further and price hikes start reflecting fully. In the first week of October, the company also took a price cut in its popular brands Lifebuoy and Lux to drive demand and volume growth.

• Investors will be keenly monitoring management commentary on
• Improvement in rural business
• Outlook on raw material costs
• Nutrition, out-of-home and discretionary categories
• Strategy on new launches
• Sustainability of cost-saving initiatives