Hindustan Unilever dips 2% on muted September quarter results

Shares of fast moving consumer goods (FMCG) major, Hindustan Unilever (HUL) dipped 2 per cent to Rs 2,495 on the BSE in Friday’s intra-day trade after the company delivered a muted performance in September quarter (Q2FY24), amid subdued rural demand. The company is cautiously optimistic in the near-term.

The firm logged a net profit of Rs 2,656 crore in the second quarter, down 0.3 per cent from Rs 2,665 crore posted a year ago. Revenue, on the other hand, rose 3.1 per cent year-on-year (Y-o-Y) to Rs 15,364 crore. Sequentially, HUL’s revenue grew by 0.6 per cent and net profit by 4 per cent. According to Bloomberg, analysts had pegged HUL’s revenue at Rs 15,577 crore and net profit at Rs 2,609 crore for Q2FY24.

HUL registered a volume growth of 2 per cent during the quarter, while profit before interest, depreciation and tax (PBIDT) was up 11.6 per cent Y-o-Y at Rs 3,973 crore. The reported EBITDA margin increased 130 bps at 24.6 per cent over the previous year quarter.

The company said the reported numbers include a one-off credit from favourable resolution of a past indirect tax litigation. This benefitted reported turnover and profit after tax growth by 1 per cent and 4 per cent respectively.

Looking forward HUL’s management remains cautiously optimistic. FMCG demand is likely to continue a gradual recovery with tailwinds from the upcoming festive season, sustained buoyancy of services and government’s thrust on capex. At the same time, we need to be watchful of volatile global commodity prices as well as the impact of monsoon on crop output and reservoir levels, the management said. HUL remain confident of the mid to long term potential of India.

Going ahead, gradual recovery seen in demand with tailwinds from festive season, sustained buoyancy of services and government’s thrust on capex, however, volatility in commodity prices as well as impact of monsoon on input price remains watchful, ICICI Securities said in a note.

HUL’s Q2FY24 performance was in line with our volume, sales and PAT estimates. Volumes grew only 2 per cent Y-o-Y (est. 3 per cent) as smaller/regional players outperformed larger rivals during the quarter, Motilal Oswal Financial Services (MOFSL) said.

The rural market delivered a volume decline in two years’ basis. However, the brokerage firm expects rural sentiment to improve during the upcoming festive season as a moderation in inflation should lead to an increase in disposable income. Key factors to watch out for include heightened competition, volatile global commodity prices and the impact of an uneven monsoon on crop output, MOFSL said in result update.

The outlook for HUL remains balanced as lower commodity costs and a gradual recovery in rural demand could be offset by reduced leverage on pricing and increased competition from smaller players in some categories, the brokerage firm said.