HUL Q4 results preview: Here's what brokerage expect from the FMCG giant

Hindustan Unilever (HUL) Q4FY24 preview: Fast moving consumer goods (FMCG) giant Hindustan Unilever (HUL) is set to report its March quarter (Q4FY24) results on Wednesday, April 24, 2024.

According to analysts, the company's revenue and profit for the quarter under review may remain little changed as demand trends remain muted. They expect HUL's Q4FY24 revenue to grow in the range of 1 per cent to 2.5 per cent on a year-on-year basis, while net profit may stay flat. 

Here's a lowdown of what key brokerages expect from HUL's Q4 results:

Motilal Oswal

Brokerage firm expects that the volume growth has bottomed out and anticipate a

gradual volume recovery in the financial year 2025 (FY25). HUL wide product basket and presence across price segments should help the company achieve a steady growth recovery.

Additionally, there is scope for a turnaround in part of beauty & personal care (BPC) and food and refreshment (F&R). “We will monitor the execution in these segments under the new CEO. The valuation at 45x FY26E earnings per share (EPS) is reasonable given its last five-year average price-to-earnings (P/E) of 65x on one year forward.”

Therefore, Motilal Oswal expects HUL to post a profit of Rs 2,507.6 crore, Ebitda at Rs 3,542 crore and sales at Rs 15,363.9 crore, in the March quarter.

Nuvama Institutional Equities

It anticipates HUL's Q4FY24 revenue to grow 1 per cent Y-o-Y/down 1 per cent Q-oQ at Rs 14,784.4 crore, while Ebitda and core net profit are expected to dip 2 per cent and 4 per cent Y-o-Y to Rs 3,400 crore and Rs 2,458.1 crore, respectively.

That apart, it expects volumes to grow 3 per cent Y-o-Y, driven by 2 per cent dip in prices. The brokerage anticipates demand trends to be similar to Q3FY24 with marginal improvement in rural (across categories) on a two-year basis.

"Urban continues to grow faster than rural, and premium continues to do better than mass for HUL. Elongated winters are unlikely to benefit much but trade inventory shall get cleared. We expect gross margins to improve 269bp Y-o-Y. Ebitda margin shall dip 70bp Y-o-Y due to high A&P, second year in terms of increase in royalty, and GSK consignment arrangement expiry (likely Rs 60-75 crore Ebitda impact)," the brokerage said.

Elara Capital

In Q4FY24, demand for FMCG products faced ongoing challenges, dampening volume growth. There was no meaningful change in the rural growth trends. Factors,such as low farm income and the rise of small regional competitors, are adversely affecting larger companies, analysts at Elara Capital said. 

A delayed Winter is likely to impact seasonal categories, such as beverages. “We note Chyawanprash sales lost steam in Q3, due to delayed Winter and have not recovered in Q4. Food categories continue to outperform home and personal care products. Reviving rural demand is crucial for the FMCG sector, with companies pinning hopes on a favourable Monsoon, which could stimulate the rural economy,” the brokerage said in a note.

Considering these aspects, Elara Capital expects HUL to post a revenue of Rs 14,874 crore, Ebitda of Rs 3,390.1 crore, and adjusted net profit at Rs 2,541 crore.

Kotak Institutional Equities

Analysts expect flat Y-o-Y revenue growth in view of demand trends largely tracking Q3, resulting in 2 per cent Y-o-Y growth in underlying volume growth (UVG). “HUL's price reductions (we estimate 2 per cent Y-o-Y decline in Q4) is expected to impact topline growth,” the brokerage noted.

It expects home care (HC) growth at 0.3 per cent Y-o-Y, BPC growth to be flat Y-o-Y, owing to anniversarisation of some price cuts in soaps; delayed onset of winter (30 per cent of skincare portfolio) would have benefited offtakes and helped clear some channel inventory, and 1.2 per cent F&R growth.

“We expect a 70 per cent Y-o-Y decline in other operating income due to discontinuation of Gsk Consumer Healthcare Over the Counter (GSK-CH OTC) distribution business in November 2023,” Kotak Institutional Equities said.

Therefore, Kotak institutional Equities expects HUL to post an Ebitda of Rs 695 crore, reporter/adjusted profit of Rs 493.5 crore and sales at Rs 3,306.7 crore.

Antique Broking

The brokerage expects 2.5 per cent year-on-year revenue growth at Rs 15,270.1 crore, driven by home categories. Personal care performance is expected to be soft due to an increase in competitive intensity and price cuts in the personal wash categories. Food & refreshment performance is expected to be soft as headwinds in the nutrition portfolio continue. Receding inflation to drive gross and Ebitda margin expansion of 235 bps and 60 bps Y-o-Y.

It forecasts Ebitda at Rs 3,653.5 crore (up 5.3 per cent Y-o-Y/3.2 per cent Q-o-Q), and net profit at Rs 2,594 crore, up 5 per cent Y-o-Y/2.1 per cent Q-o-Q.