FMCG major Hindustan Unilever will be reporting its December quarter results later today. The results come amidst urban demand being steady but rural demand continuing to struggle.
A CNBC-TV18 poll expects the company's revenue to grow in low double-digits while net profit may also grow in double-digits from last year. EBITDA margin may be under pressure on a year-on-year basis, but is expected to expand sequentially.
HUL's domestic volume growth for the quarter is seen between 4-5 percent, according to estimates. Most of HUL's FMCG peers in their quarterly business updates have spoken of the fact that urban demand has been steady, but rural demand continues to remain under pressure.
A collapse in palm oil prices has enabled the company to take pan-India price cuts in soaps. The addition of grammage in soaps is further likely to aid volume growth in this segment. Grammage technically means increasing or decreasing the quantity per pack.
While HUL undertook price cuts in soaps, it has had to take further price hikes in the detergent segment during the quarter. The impact of raw material inflation in sugar, milk, barley and wheat will need to be seen on the food and refreshments segment.
As gross margin is likely to improve sequentially, the company will utilise that to partially ramp up spends on advertising and promotion.
Management commentary from HUL's management is always key as it sets the tone for the overall sector. The street will keenly await comments from the management on the prevalent demand situation, outlook on raw material inflation, competitive intensity and the channel mix.
Shares of Hindustan Unilever are currently trading 6 percent below their 52-week high. At current levels, the stock is trading at 60 times current year earnings.
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