Gains for Hindustan Unilever stock depend on pace of growth recovery

HUL posts steady volume growth and stable margins; FY27 outlook hinges on demand revival, pricing trends and execution of new strategy

Hindustan Unilever Limited’s (HUL) standalone revenue grew 4.4 per cent year-on-year (Y-o-Y), while volume rose 3.5 per cent during the third quarter of financial year 2026 (FY26). Operating profit was up 5.3 per cent Y-o-Y and profit before tax grew 2.9 per cent Y-o-Y. This was a little ahead of consensus. The fast-moving consumer goods major has guided for FY27 revenue growth to exceed FY26, while maintaining stable margins. Standalone gross margins contracted 20 basis points Y-o-Y to 50.3 per cent.

 

The maker of surf excel saw its consolidated revenue grow 6 per cent (adjusted for ice-cream demerger) at ₹16,230 crore. Underlying volume growth was at 4 per cent Y-o-Y. October was impacted by GST reform, offset by restocking in November and December. Improvements in demand have led to confidence about FY27. 

Consolidated gross margins expanded 30 basis points Y-o-Y to 51.4 per cent. HUL anticipates mild raw material inflation. Operating profit margin in Q3 was flat Y-o-Y at 23.7 per cent and the company expects consolidated margins to stay in the current guidance range of around 23 per cent.

 

The firm is focussed on volume growth, even if it leads to margin pressures. Management is optimistic that initiatives across products and channels will lead to higher performance. Macroeconomic recovery will be supportive, but the strategy of the new CEO will be a monitorable.

 

Underlying volume grew 4 per cent Y-o-Y. Home care saw mid-single-digit volume growth, with revenue up 3 per cent Y-o-Y to ₹5,890 crore but there was a negative price trend. Household care had double-digit underlying volume growth. The segment margin dropped 20 basis points Y-o-Y to 18.7 per cent.

 

The beauty and wellbeing segment saw low-single digit volume growth, with revenue up 10.5 per cent to ₹3,930 crore. Hair care saw double-digit growth on the back of volume. Within skin care and colour cosmetics, the winter portfolio saw double-digit growth offset by a weak performance from the non-winter portfolio. The segment margin contracted 250 basis points Y-o-Y to 26.1 per cent. Personal care saw a small single-digit decline in volumes, but sales grew 6 per cent Y-o-Y to ₹2,370 crore. Premiumisation is a key growth driver but the personal care segment margin contracted 10 basis points Y-o-Y to 21 per cent.

 

Food & refreshment (F&R) delivered high-single-digit volume growth, with sales up 6 per cent Y-o-Y at ₹3,600 crore. Tea saw mid-single-digit volume growth, but revenue growth was low, given price cuts. Coffee had double-digit growth, with both price and volume growth. But the segment margin contracted 120 basis points Y-o-Y to 21 per cent.

 

The consolidated operating profit margin remained flat Y-o-Y at 23.7 per cent and operating profit grew 6 per cent Y-o-Y to ₹3,900 crore (adjusted for the ice-cream demerger). Net profit was flat Y-o-Y at ₹2,620 crore. Exceptional items included ₹498 crore for the fair valuation of financial liabilities arising from acquisitions, restructuring expenses (₹68 crore) and acquisition and disposal-related costs of ₹11 crore. The impact of the new labour code stood at ₹113 crore.

 

HUL has also debited the fair value of the ice cream business to retain earnings, treating it as dividend distribution to shareholders of HUL. The difference between fair value and the carrying amount of the net assets of the ice cream business is recognised as a gain on demerger and disclosed as an exceptional item (discontinued operations), of ₹4,611 crore.

 

The management says home care pricing has been benign with mild inflation offset by calibrated price hikes. Management expects low-single-digit price growth for FY27. The guided FY27 revenue growth will be better than FY26.

 

Quick commerce (QC) is emerging as a critical channel, contributing 3 per cent of sales and scaling rapidly. HUL has established a dedicated quick commerce team and is deploying advanced supply chain capabilities, improving service levels and reducing lead time. The QC portfolio is premium, making it margin accretive.

 

The ice cream demerger is completed, with Kwality Wall’s India set to list. The Board has approved acquisition of the remaining 49 per cent stake in Oziva for ₹820 crore to strengthen its presence in the health & wellbeing segment. HUL will divest its minority stake in Nutritional Lab for ₹310 crore. Some brokerages are positive on the outlook for the stock.