Hindustan Unilever (HUL) will report its quarterly earnings tomorrow, where analysts expect the FMCG major to report an on-year growth in revenue and net profits, however, margins are projected to remain under pressure. The growth in revenue will be backed by a price hike undertaken by the company and growth in volume, which will in turn aid the net profit. However, with raw material prices continuing to remain elevated, margins are likely to take a hit. HUL is an FMCG major selling foods, beverages, cleaning agents, personal care products, water purifiers, and other fast-moving consumer goods. The share price of HUL is up 8.7% so far this year, outperforming the benchmarks Sensex and Nifty. On Monday the stock was trading flat at Rs 2,567 per share.
Revenue and profits set to rise
HUL is expected to post strong on-year growth in revenue in the April-June quarter. Analysts at domestic brokerage firms estimate that HUL’s revenue will rise 12-15%. The growth in revenue would be aided by a jump in volumes and a price hike undertaken by the company. “The positive volume growth is mainly on account of lower sales in the base quarter due to the second wave of the pandemic,” ICICI Direct said.
Volumes up or down?
On volumes, domestic brokerage firms have a mixed view with Motilal Oswal expecting 2% on-year domestic volume growth, on the back of a high base of last year. Meanwhile ICICI Direct is projecting 4% volume growth while adding that the positive volume growth is mainly on account of lower sales in the base quarter due to the second wave of the pandemic.
On the other hand, Prabhudas Lilladher said that HUL’s volume might have declined by 1%. While Edelweiss highlighted last year’s high base while projecting 3% volume growth, they added that consumption might have seen some degrowth due to price hikes with rural seeing more impact than urban.
EBITDA margins under pressure
Even though the FMCG company has undertaken price hikes to combat rising prices, they are not expected to have aided the margins. Prabudas Lilladher said Gross/EBITDA margins of HUL may decline by 170/40 bps on year respectively. Other analysts too have predicted a 120-140 basis point cut in EBITDA margins of HUL as inflation continues to hurt the books.
Estimates for April-June quarter
Motilal OswalRevenue growth: 12% on-yearNet profit: 12.6%
ICICI DirectRevenue growth: 14.2% on-yearNet profit: 9.5%
EdelweissRevenue growth: 14.9% on-yearNet profit: 6.2%
Prabudas LilladherRevenue growth: 12% on-yearNet profit: 12.6%
