HUL Q4 Preview: Same old story of muted demand, flattish volumes to repeat

It is the same old story of subdued demand and flattish volume growth for Hindustan Unilever Ltd (HUL), but packaged in a new quarter of January-March 2024. The demand slowdown is particularly stark in urban areas even as the company faces increased competition.

Apart from the demand and competition, the growth has been impacted by multiple factors including adverse mix dynamics and input cost inflation.

Revenue from operations in the fourth quarter is likely to rise by a marginal 2% year-on-year (YoY), according to an average estimate of six brokerages. Volumes for the reporting period are seen flat, a trend mirrored in the previous quarters.

Net profit for the quarter may rise 3% YoY, the estimates revealed. EBITDA growth is estimated at 2% YoY in Q4FY25.

Segment wise, home care and hair care shall continue their good growth momentum in volumes while tea and soaps shall experience pressure due to grammage cuts and price hikes.

Here’s what analysts expect from HUL Q4:

Morgan Stanley

Flat volume growth (similar sequentially), 1.7% Pricing/mix growth (1.8% in 3Q); EBITDA margins to remain flat on YoY and QoQ basis.

HDFC Securities

Urban slowdown and increased competition across categories continue to weigh on demand. Hyperinflation in the RM index (particularly tea and PFAD) to weigh on gross margins. Higher royalty rate and termination of GSK consumer distribution contract to hurt margins

JM Financial

Volume growth to remain muted which along with price cuts in Detergents to impact topline. Higher RM cost to impact margins resulting in flattish EBITDA on YoY basis.

Nuvama Equities

Overall, in Q4, YoY trends of Q3 continue for HUL and for the sector (as per Nielsen trends). In Q4FY25, we reckon revenue shall inch up 2% YoY. Volumes are likely to remain flat YoY.

We forecast a 2% price hike in Q4FY25 on an overall portfolio basis, with price hikes taken in mid-Q3FY25 now flowing fully in Q4FY25; but offset by price cuts in detergents (Home Care) to pass on RM deflation in crude oil-related inputs. Other commodity costs remain benign.

Sunscreen and ice creams are faring well, but it does not move the overall needle by much. Gross margins shall decline 107 bps YoY to 50.8% due to palm oil and tea inflation. However, EBITDA margins shall expand 25bp YoY to 23.4%, due to a cut in A&P spends and other costs (we expect 9.5% of sales)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)