HUL Q2 profit seen up 10%, domestic volume growth may be around 4-5%

FMCG major Hindustan Unilever's second quarter profit is seen rising 10.5 percent year-on-year to Rs 1,210 crore and revenue may increase 5.8 percent to Rs 8,971 crore.

EBITDA (earnings before interest, tax, depreciation and amortisation) is likely to grow 17.5 percent to Rs 1,649 crore and margin may expand 180 basis points to 18.4 percent compared with same quarter last fiscal, according to average of estimates of analysts polled by CNBC-TV18.

Margin may be aided by higher gross margin, lower advertising spends & cost controls.

Its parent company Unilever has guided for 100 bps improvement in operating profit margin for 2017.

Higher depreciation (commissioning of manufacturing unit at Assam) may lower profit growth. Base quarter (Q2FY17) had other income of Rs 253 crore against quarterly average of around Rs 100 crore, so profit may look optically lower.

There could be change in Q2FY17 revenue as it included excise duty. Excise duty removed after the GST implementation.

Analysts expect domestic volume growth at around 4-5 percent for the quarter against negative 1 percent in Q2FY17 and zero percent in previous quarter.

The growth in personal care segment (which contributed around 50 percent to total revenue) could be around 3-4 percent, home care (30 percent of total revenue) 4-5 percent, refreshments (15 percent) 8-10 percent and foods segment 6-7 percent.

Volume growth may be aided by rollout of Ayush brand and advertising spends on Indulekha.

Key to watch out for would the commentary on:-
>Volume growth and consumer demand environment;
>Impact of innovation and new product launches - Naturals Segment - Ayush;
>Cost savings in supply chain and marketing;
>Input cost environment;>Advertising spend outlook.