HUL Q3: Revenue May Grow Up to 12% YoY; margins to contract, according to analysts

Fast-moving consumer goods giant Hindustan Unilever (HUL) is expected to report 9-12% year-on-year revenue growth in the December quarter (Q3FY22) due to price increases taken in recent quarters , according to analysts. Its volume growth, however, is expected to be flat. The company is expected to release its third quarter results on Thursday, January 20.

Brokerages JM Financial, Edelweiss Securities and Kotak Institutional Equities forecast HUL volume growth of 1-2%, compared to a 4% increase in the prior quarter and in Q3FY21. This is due to recent weak rural demand and weak growth in sales volume.

In addition, the consumer goods sector is also expected to be negatively impacted by high commodity inflation, which is expected to affect the sector’s gross margins.

This also being true for HUL, analysts expect a decline of nearly 200 basis points year-on-year in its gross margins. However, it could perform relatively better on the operating profit (EBITDA) margin front due to its lower advertising and promotional spend.

“With the continued increase in prices of key raw materials such as palm oil and crude-based packaging costs, we expect a 202 basis point year-over-year contraction in gross margins for HUL. But, a likely 170 basis point decline in marketing spend would keep EBITDA margins at 24.5%, or 40 basis points higher,” ICICI Securities said.

The FMCG indicator may signal a 14-24% increase in PAT from a year ago. According to an average of five estimates, the company could post revenues of Rs 13,018 cr, PAT of Rs 2,296 cr and EBITDA margins of 25% for the reference quarter.

Between October and December, HUL stock fell 12.6%, underperforming the benchmark Sensex index and the BSE FMCG index, which fell 1.5% and 7.3% respectively during this period. .

Here are some projections of the best brokers:

ICICI titles

The brokerage expects the company to post 10.6% year-on-year revenue growth, driven primarily by price increases taken in the home care, beauty and personal care category ( PCBs). He estimates that sales for the homecare, PCB and food businesses grew by 11.8%, 9% and 6.9%, respectively. Operating profit growth of 12.5% ​​and a strong increase in other income would result in net profit growth of 18.5%, he said.

Kotak Institutional Stocks

Analysts have forecast a deterioration in rural demand for PUH, with urban growth outpacing it. The brokerage also expects continued market share gains for HUL. On the gross margin front, he estimates a contraction of 210 basis points year-on-year due to widespread inflationary pressures. But, it pegged its operating profit margins at 25%, up 40 basis points sequentially and 90 basis points annually.

Edelweiss Titles

The brokerage estimates that HUL revenue and PAT growth will be 10% and 19% year-over-year, respectively. By comparison, revenue growth was more than 30% over the prior year. He also expects the company’s operating profit to have risen 13% year-on-year, from 16.7% last year.

“HUL will be one of the few consumer companies to see its EBITDA margin increase in Q3FY22 on a quarterly and annual basis,” he said, projecting that metric to 24.8%, up 37 basis points. compared to last year.

Main controllable elements

Comments on the rural outlook and the impact of the downturn in this activity would be essential. Pricing actions, new launches and the degree of margin protection against additional price increases taken in previous quarters will also be closely watched.

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