HUL Q3 Preview | Revival in discretionary products to drive 9.5% sales growth

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26 Aug, 2025 12:21

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Hindustan Unilever (HUL) is expected to report a 9.5 percent year-on-year growth in revenue at Rs 12,995 crore in the December quarter, aided by the revival in discretionary products portfolio, an average of estimates from five brokerages polled by Moneycontrol showed.

The country’s largest fast-moving consumer goods manufacturer will report its December quarter earnings on January 20.

Discretionary products are likely to report a strong double-digit growth in sales following the reopening of the economy, which helped boost consumption in the urban market.

“Discretionary category witnessed recovery with the easing of restrictions and uptick in the urban market supported by increasing out-of-home mobility,” Antique Broking said in a preview note.

Analysts also expect the nutrition products portfolio to do well. “Nutrition business performance was driven by the integration of the distribution channel,” the note said.

That said, the slowdown in the rural market that contributes the most to HUL’s revenues could hit the company’s topline performance.

The rural market has seen a slowdown since the end of the September quarter in the aftermath of a devastating second coronavirus wave as well as delay in kharif crop harvesting season.

The slowdown is expected to result in urban areas outpacing the rural market for the first time since the beginning of the pandemic. It will lead to a slowdown in volume growth for Hindustan Unilever, which is expected to report a volume growth of 2.3 percent in the reporting quarter.

“We model 1 percent YoY growth in underlying volume as we expect deterioration in rural demand with urban growth outpacing rural demand,” analysts at brokerage firm Kotak Institutional Equities said in a note.

Besides the slowdown in volume growth, the company’s gross margins are expected to shrink sharply on a year-on-year basis in the reporting quarter due to rising costs of raw materials.

At the same time, analysts expect HUL’s operating margins to expand 70-90 basis points on-year to 24.8-25.0 percent aided by price hikes undertaken by the company to counter the rise in input costs.

Overall, Hindustan Unilever’s operating profit for the quarter is expected to rise by 11.7 percent on a year-on-year basis to Rs 3,188 crore. Similarly, the company’s net profit is likely to grow 16.7 percent on-year to Rs. 2,242.7 crore.

Motilal Oswal Financial Services said investors would keenly await the management’s commentary on competitive intensity, rise in raw material prices, and demand in discretionary products.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.