HUL to report Q1 numbers today; here's what brokerages say

Hindustan Unilever, which has gained over 39% so far in 2017, is slated to report its June quarter numbers later in the day.

Analysts expect HUL's sales growth to increase by around 4% on the back of a flat volume growth as destocking owing to Goods and Services Tax (GST) impacted the company's CSD (canteen-store-departments) offtake in the last one month. CSD contributes 5-6% to the overall sales. 

"We expect HUL to record a volume decline of nearly 1-2% YoY on a base of 4% YoY (volumes grew 4% YoY in Q4FY17 on a base of 4% YoY) owing to impact in CSD sales and destocking in wholesale channel owing to GST," said brokerage Edelweiss Securities in a research note.

Brokerage JM Financial expects HUL’s volumes to come in flat, and sales to grow by 5% on 4-5% price-led growth. It also said that the impact of GST-related destocking is not expected to be anywhere as severe as witnessed during demonetisation.

Brokerages, however, expects the company to hold its margins in the June quarter.  

"HUL is expanding its focus on herbal segment under brand Aayush which should aid volumes to some extent. This coupled with benign raw material prices should aid HUL in holding its margins. Further, with multiple cost reduction initiatives such as ZBB, efficiencies in ad spends, etc should cushion EBITDA," said Edelweiss Securities.

"Gross profit margin is expected to compress marginally by 22 bps, but its impeccable cost-efficiency programs (SG&A estimated +2.5% vs topline growth of 4.5%) would help drive EBITDA margin expansion by 44 bps," said analysts at JM Financial in a report. 

Meanwhile, Kotak Institutional Equities estimated nearly 2% growth in domestic FMCG sales aided by 2% price-led growth.

"We expect underlined volume growth (UVG) to remain flat due to destocking impact; we model 1% and 2.5% yoy growth in home care and personal care segment," it said in a note.

Prabhudas Lilladher noted that HUL's PAT is expected to increase 6.1% in June quarter, while pace of GST implementation across distribution chain will hold key to Q2 growth.