HUL Q1 Preview: Revenue growth in single-digit, volume growth around 5-6%

Fast-moving consumer goods (FMCG) major Hindustan Unilever (HUL) is expected to report a profit after tax (PAT) of Rs 2,620 crore, which will be higher by 14.5 percent year-on-year (YoY), for the June quarter of the current fiscal, driven by volume growth. The company will announce its results on Thursday (July 20).

A CNBC-TV18 poll expects single-digit growth in revenue, while gross margin is expected to improve between 180-200 basis points.

On the volumes front, the street is anticipating HUL to report volume growth in mid single-digits, anywhere between 5 percent to 6 percent. Grammage addition, price cuts are likely to aid volume growth in the soaps business.

HUL — a subsidiary of the British company Unilever — is likely to report Rs 3,650 crore in earnings before interest, taxes, depreciation and ammortisation (EBITDA), which would mean a YoY increase of 12.5 percent, according to CNBC-TV18's poll.

Segment wise, Home Care is likely to see growth in double-digits, beauty and personal care will grow 8-10 percent. Food and refreshments, on the other hand, will likely grow between 5-7 percent.

Unseasonal rainfall will likely impact ice-cream demand in North India, analysts say.

Commentary from the management on demand environment, inflation cool-off, outlook on acquisitions and leadership changes will be the key.

HUL has upheld its 10-year average valuations, despite headwinds like rural slowdown and inflationary stress hurting margins on account of robust execution, which has aided in company gaining share even in a tough setting.

Moreover, the company will look to intensify marketing spending in a bid to gain or defend market share. In FY23, its growth significantly beat the market, leading to strong market share gains.

"We also believe that HUL is the best prepared among peers in terms of technology and e-commerce strategy to deal with potentially significant disruptions going forward," Motilal said in a report earlier.

With the expectation of a normal monsoon, a gradual recovery in rural areas, and a reduction in commodity costs, the FMCG major is expected to regain its mid-to-high teens earnings growth trajectory it exhibited for the four years before Covid, the brokerage said.

Shares of HUL were trading nearly 1 percent lower at Rs 2,663 apiece on Wednesday. The stock has gained 4.09 percent on a year-to-date basis, while it rose 3.68 percent in the last 12 months.

Emkay in June initiated its coverage on HUL, with a 'Hold' call and Jun-24E target price of Rs 2,850 per share.

Key downside risks include persistent slowdown in rural, aggression from Reliance Industries, and inflation in raw material prices, while upside risks include a sharp recovery in the company’s BPC and HFD portfolios, strong recovery in rural markets, and easing of raw-material prices.