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HUL Q1 Preview: FMCG firm may see margin shrink; outlook for competition, demand scenario, raw-material cost key monitorables

HUL Q1: Brokerage firms, which foresee a mixed report card, expect no material benefit from panic buying and consumer upstocking during the second wave of COVID-19

July 22, 2021 / 08:50 AM IST

Fast-moving consumer goods (FMCG) company Hindustan Unilever (HUL) will release its June quarter scorecard on July 22.

The numbers may come mixed, with revenue showing growth against the previous year but margin may be subdued. Brokerage firms expect no material benefit from panic buying and consumer upstocking during the second wave of COVID-19.

Apart from the numbers, outlook for competition, new launches, raw- material cost, recovery in rural business and demand scenario will be the key monitorables.

Kotak Institutional Equities estimates a 13.8 percent year-on-year (YoY) rise but a quarter-on-quarter (QoQ) decline of 1 percent in HUL's Q1FY22 revenue. Adjusted PAT may rise 9.3 percent YoY but fall 2.7 percent QoQ.

EBITDA may rise 11.3 percent but EBITDA margin may fall 56 bps YoY, Kotak said.

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It, however, expects a decent rural demand outlook despite some impact from COVID-19 and continued traction for the nutrition business apart from some destocking pertaining to distributor consolidation.

"We forecast—(1) 14.5 percent revenue growth in the home care segment (2-year CAGR at 6 percent), (2) 12.5 percent revenue growth in BPC (2-year CAGR at -0.5 percent), and (3) 20 percent organic revenue growth in F&R (2-year CAGR at 4.6 percent) partly aided by price increase in tea," Kotak said.

Brokerage firm Edelweiss Securities anticipates revenue and EBITDA to grow 11.1 percent and 6.5 percent, respectively, while PAT may dip 0.6 percent YoY.

"We expect HUL to see volume growth of 5 percent on a base of -8 percent YoY growth (Q4FY21 saw volume growth of 16 percent YoY on a base of -7 percent). On the pricing front, we expect 6 percent price growth given hikes taken in soaps, tea and laundry segment," said Edelweiss.

The brokerage firm said hygiene and in-home categories have continued to grow but lower than last year. The first couple of weeks of April saw continued momentum of the March quarter, May was the worst month and June saw sequential improvement.

"A&P spends to continue at healthy levels. Due to sales and distribution integration in the GSK portfolio, the company is seeing some down stocking from sub stockiest. We expect EBITDA margins to contract 100bps YoY," said Edelweiss.

IDBI Capital expects revenue to grow at 19 percent YoY, driven by home-care business and food and refreshment. It expects beauty and personal care to report 15 percent YoY revenue growth.

"Gross margin is likely to contract by 83 bps YoY to 51 percent led by inflationary raw material prices. Palm oil price, PFAD and tea price increased by 46 percent, 90 percent and 17 percent YoY, respectively, during

Q1FY22. We expect EBITDA margin to contract by 74 bps YoY to 24 percent," said IDBI Capital.

Motilal Oswal Financial Services expects the company's domestic volume growth at 5 percent YoY. It expects an 8.5 percent YoY rise in revenue while PAT can grow 2.4 percent YoY.

"Watch out for impact on sales of GSKCH products due to temporary destocking from distributor integration," said the brokerage.

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.
Moneycontrol News
first published: Jul 22, 2021 08:25 am

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