HUL Q2 Preview: Profit may rise 8-10% but margin may contract

NEW DELHI: FMCG major Hindustan Unilever () is likely to report a 8-10 per cent year-on-year (YoY) rise in net profit on a double-digit rise in sales. Volumes may rise 5-6 per cent while margins may contract on a YoY basis. All eyes will be on the outlook on rural business, recovery in personal care, pricing actions and new launches strategy and sustainability of cost-saving initiatives.

The earnings are due Tuesday.

Analysts said most FMCG companies hiked product prices to pass on part of the inflation, yet a YoY dip in gross margins are likely for most companies including HUL. The FMCG giant took one more calibrated hike in Q2FY22 in the skin care and laundry segment, said Edelweiss Securities, while noting that a 60 per cent YoY rise in palm oil prices might have impacted HUL during the quarter.

“Rural demand has remained resilient and urban demand saw an uptick due to recovery in spending. July and August demand were slightly ahead of June. Tailwinds in hygiene segment have been coming down. We estimate a price hike of 5 per cent, particularly in the skin care and laundry segment. Palm and crude oil prices continue to be high while tea prices softened YoY. Overall, we expect margins to dip 40 bps YoY and increase 80 bps QoQ,” Edelweiss said.

HDFC Institutional Equities expects HUL to report an 8.2 per cent YoY rise in net profit at Rs 2,200 crore for the quarter. Sales are likely to rise 10.2 per cent YoY to Rs 12,600 crore, up 10.2 per cent YoY. It sees Ebitda margin at 24.3 per cent, down 76 basis points YoY.

ICICIdirect said HUL may log a 10 per cent rise in net profit at Rs 2,210.2 crore for the quarter on a 14.8 per cent rise in sales at Rs 13,132 crore, thanks to a recovery in home care & beauty and personal care segment.

“The base quarter revenue growth was flattish for these segments. The acquired nutrition business is part of the foods & refreshment (F&R) segment. We expect 10.5 per cent growth for home care, 15.7 per cent growth for beauty & personal care and 11.3 per cent for the foods segment, respectively. We estimate 100 bps gross margins contraction with a steep increase in commodity costs. Operating margins are likely to see a 124 bps contraction in Q2FY22,” ICICIdirect.

Emkay expects a 10 per cent growth in sales led by volume growth of 6 per cent. It projects a 13 per cent growth in home segment, 6 per cent growth in personal care and 12 per cent growth in foods and refreshment (F&R) division, with home care recovery to be led by higher mobility.

It sees margin falling 20 basis points YoY to 24.9 per cent from 25.1 per cent YoY. This would still be 100 basis points higher than 23.9 per cent margin in the June quarter.


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