 "HUL Q3 preview: Analysts see muted quarter; PAT may rise 2% YoY, revenue 1%")
Hindustan Unilever (HUL), which owns brands like Dove, Vim, Surf Excel, and Horlicks, is scheduled to release its third quarter (Q3FY25) earnings on Wednesday, January 22, 2025.
Brokerages tracked by Business Standard estimate HUL's adjusted profit after tax (PAT) at Rs 2,577.97 crore, on average, implying a rise of 1.89 per cent year-on-year (Y-o-Y) as compared to Rs 2,530 crore a year ago. On a quarter-on-quarter (Q-o-Q) basis, PAT is likely to slip marginally by 0.84 per cent.
The company's revenue, on average, for the third quarter ended December 31, 2024, is anticipated at Rs 15,688.22 crore as compared to Rs 15,570 crore a year ago, which implies a rise of 0.75 per cent Y-o-Y. Sequentially, revenue may decline by 1.5 per cent.
The fast-moving consumer goods (FMCG) giant's growth, as per analysts, may have been impacted by multiple factors, including adverse mix dynamics, input cost inflation, and subdued seasonal demand, collectively moderating the overall growth trajectory. ALSO READ: HDFC Bank Q3 Preview: Analysts estimate weak profit growth; NIM, NPA eyed
Given this, analysts and investors will look forward to the company's outlook on demand and growth.
Here's what analysts expect from HUL's Q3FY25:
Motilal Oswal: As per analysts at Motilal Oswal, demand trends for HUL may remain muted with rural outperforming urban. They expect 3 per cent revenue growth in Q3FY25, at Rs 16,050 crore, as compared to Rs 15,570 crore a year ago.
The brokerage predicts 1 per cent volume growth, impacted by the price increase in soaps and tea. The company has taken a low single-digit price hike at the portfolio level.
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Meanwhile, there would be some pressure on gross profit margins, which are estimated to decline 80 basis points (bps) Y-o-Y, due to a rise in palm oil and other agri commodity prices.
Gross profit for the third quarter is pegged at Rs 8,220 crore as compared to Rs 8,090 crore a year ago.
However, Earnings before interest, tax, amortisation, and depreciation (Ebitda) margins are expected to rise 40 bps Y-o-Y due to cost initiatives taken by the company.
Ebitda, as per Motilal Oswal, is expected to come in at Rs 3,840 crore as compared to Rs 3,670 crore a year ago.
HDFC Securities: As per the brokerage, urban slowdown, and increased competition across categories will continue to weigh on demand. Further, hyperinflation in the raw material index, particularly tea and palm fatty acid, is likely to weigh on gross margins. ALSO READ: Dr Reddy's Labs Q3 Preview: Revlimid to dent US sales, profits may rise 12%
The brokerage expects gross margins at 49.5 per cent as compared to 50.6 per cent Y-o-Y.
Moreover, higher royalty rates and the termination of GlaxoSmithKline (GSK) Consumer Healthcare distribution contract may hurt margins. GSK Consumer merged with Hindustan Unilever Limited (HUL) in 2020.
Analysts expect Ebitda for the third quarter ended December 31, 2024, at Rs 3,442.4 crore as compared to Rs 3,540 crore a year ago. Besides, Ebitda margin for the quarter under review is anticipated at 22.2 per cent as compared to 23.7 per cent a year ago.
Centrum Broking: Centrum estimates 3.5 per cent Y-o-Y revenue growth due to slowdown in consumption. They have built-in 2 per cent volume growth. Further, despite a gradual recovery in the rural market, urban consumption remained tepid in the quarter, as per the brokerage.
The brokerage expects revenue to come in at Rs 15,718.3 crore as compared to Rs 15,188 crore a year ago.
Moreover, increasing competition from direct-to-consumer (D2C) players, discounting on e-com/quick commerce platforms, and a persistent slowdown in general trade are expected to impact HUL sales.
Analysts predict the home care segment to grow at 5 per cent (Y-o-Y/Q-o-Q?), Beauty and Personal Care (BPC) at 3 per cent, and food at 2 per cent. They expect a decline of 31 bps Y-o-Y in Ebitda margin to 23 per cent whereas adjusted net profit may grow marginally by 1.4 per cent Y-o-Y.
Ebitda is expected at Rs 3,615.2 crore as compared to Rs 3,540 crore a year ago. Ebitda margin is pegged at 23 per cent as compared to 23.7 per cent Y-o-Y.
The brokerage expects adjusted profit at Rs 2,584.7 crore as compared to Rs 2,549 crore a year ago.
JM Financial: The brokerage expects volume growth to remain muted in the backdrop of weakness in soaps, tea, foods, and winter portfolio. However, pricing is likely to improve.
Moreover, higher raw material costs are likely to impact margins, resulting in lower growth in Ebitda.
JM Financial anticipates Ebitda for Q3 at Rs 3,628.1 crore as compared to Rs 3,540 crore a year ago.