Hindustan Unilever falls 2% as Q4 profit slips; brokerages remain cautious

Fast moving consumer goods company Hindustan Unilever Limited (HUL) shares dropped as much as 1.82 per cent to hit an intraday low of Rs 2,218 per share.

The fall came after the company announced a mixed set of March quarter (Q4FY24) results. Hindustan Unilever’s profit dipped 1.6 per cent to Rs 2,558 crore, from Rs 2,600 crore a year ago.

The FMCG major’s revenue rose marginally to Rs 15,041 crore in the March quarter, while volume growth rose 2 per cent Y-o-Y. Sequentially, HUL’s revenue was down 1.7 per cent, but its net profit was up 2 per cent.

The company, however, anticipates a gradual improvement in consumer demand. 

Its earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin declined 30 basis points (bps) to 23.4 per cent declined by 30 bps, primarily due to a 60-bps impact from the termination of the GSK consignment selling arrangement and investments in long-term capabilities.

“We have seen gradual recovery sequentially. Every quarter, it gets a little bit better as the bases lap. We believe that the market is slowly returning back to normal. If macros and monsoons do help the agri-economy -- that is a certain factor that’s outside the control of everybody -- then that will also add to the change,” said Rohit Jawa, managing director & chief executive officer of HUL, at the company’s press conference post results.

Here’s what brokerages said:

Analysts at Prabhudas Lilladher said that numbers were in line with estimates. But the fourth quarter of financial year 2024 reported volume growth was 2 per cent with negative realisation for a consequent second quarter. “We expect slow and modest recovery resulting in gradual pick up in volumes with realisations turning positive in the second half of financial year 2025 (H2FY25). We believe heightened competitive intensity will limit any meaningful recovery in both volumes and margins in  the near term. Retain hold.”

While food and refreshment (F&R) volume decline got arrested, overall volume growth at 2 per cent didn’t see acceleration versus recent quarters due to decline in mass skin-care and mass/popular soaps – a function of high competitive intensity, analysts at JM Financial noted. 

“In our view, near term earnings construct still seems not very exciting - management remains hopeful of gradual recovery in rural markets (contingent on likely normal monsoons) which along with corrective measures undertaken in mass end segments should lead to better volume trajectory,” JM Financial said in a note.

With absence of pricing lever (guidance of low single digit decline in H1 & low single digit growth over H2FY25E) and competitive intensity sustaining, margin expansion is unlikely, analysts said.

Nuvama Institutional Equities analysts said slower ramp-up in overall pricing and demand shall remain a slight concern, going ahead.