FMCG major Hindustan Unilever Ltd (HUL) is likely to post up to 11 per cent on-year revenue growth in October-December quarter of FY22. The company is scheduled to report its third quarter earnings on Thursday, 20 January 2022. Analysts say that key things to monitor would be improvement in rural business, recovery in personal care, pricing actions and new launches strategy; and sustainability of cost-saving initiatives. They have also estimated a PAT growth of up to 19 per cent on-year. In the period between October-December, HUL’s stock has fallen 12.6 per cent, underperforming the benchmark S&P BSE Sensex and the BSE FMCG index, which declined 1.5 per cent and 7.3 per cent, respectively. HUL is down over 2 per cent on a year-to-date basis, while it gained nearly 2 per cent in the past one month. In the six months period, HUL has fallen 4 per cent.
Here’s what brokerages expect
HDFC Securities: The research firm expects net revenue growth of 8% YoY with volume growth of 2%. It models 8/9/5% YoY growth for Home Care, BPC and Food business, respectively. It built a 138 bps YoY dip in GM (-24bps in Q3FY21 and -142bps in Q2FY22) as RM inflation sustained during the quarter. “EBITDA margin is expected to expand by 32bps
YoY to 24.4% (-87bps in Q3FY21 and -46bps in Q2FY22). EBITDA to grow by 9% YoY,” it said.
ICICI Securities: HUL is expected to witness 10.6% revenue growth largely led by price hikes taken in home care & beauty & personal care category (BPC). It has estimated home care, BPC & foods business to see 11.8%, 9% & 6.9% sales growth, respectively, during the quarter. With continuous increase in key raw material prices (palm oil, crude based packaging costs), it expects 202 bps contraction in gross margins. However, tea prices have softened considerably during the quarter. “We estimate 170 bps & 53 bps dip in marketing & overhead spends in Q3, which would keep the operating margins at 24.5% (40 bps higher). Operating profit growth of 12.5% and sharp increase in other income would drive net profit to grow at 18.5%,” it said.
Edelweiss Securities: The research firm estimates revenue, EBITDA and PAT growth would be 10% YoY, 13.4% YoY and 19% YoY, respectively. In the base quarter Q3FY21, revenue grew 20.9% YoY and EBITDA 16.7% YoY. It expects HUL to see volume growth of 2-3% YoY on a base of 4% (Q2FY22 saw 4% volume growth on 1% base). So in two years, 33.1% revenue growth and 32.4% EBITDA growth. “Rural demand is facing some slowdown, Health and hygiene segment is moderating as expected. Discretionary and out of home is witnessing improvement. We estimate price growth of 8-9% YoY,” it added. Large part of the tea price hike will see lapping this quarter. Overall, the research firm expects margins to be up 80bp YoY/20bp QoQ.
Ambit Capital: It expects HUL to be able to clock 10-11 per cent YoY revenue growth sustainability even after factoring in long-term positives of penetration improvement as well as premiumisation. However, on the flip side, the portfolio offers better growth predictability; “this gets stronger as we add elements such as distribution network, superior use of data analytics, etc.,” it said.
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