HUL Q3 earnings preview: sluggish demand will hurt volumes, and the FMCG giant is expected to achieve flat revenue and net profit growth

HUL Q3 earnings preview: sluggish demand will hurt volumes, and the FMCG giant is expected to achieve flat revenue and net profit growth

HUL Q3 earnings preview: sluggish demand will hurt volumes, and the FMCG giant is expected to achieve flat revenue and net profit growth

HUL's revenue for the quarter ending in December 2023 is predicted to be ₹15,400 crore, flat year over year (YoY). The firm anticipates a 1%–2% gradual increase in volume.

Hindustan Unilever Ltd. (HUL), a prominent player in the FMCG industry, is predicted to suffer slower profitability growth in the third quarter of FY2024 due to reduced revenue and volume growth from price reductions and poor holiday demand.

On Friday, January 19, Hindustan Unilever is scheduled to reveal its third-quarter results. Based on the average estimate from five brokerage houses, the business is expected to announce a marginal improvement in net profit for Q3FY24 of 2.2%, to ₹2,638 crore, from ₹2,581 crore in the comparable period previous year.

HUL's revenue for the quarter ending in December 2023 is predicted to be ₹15,400 crore, flat year over year (YoY). The firm anticipates a 1%–2% gradual increase in volume.

We use demand patterns that follow the second quarter to estimate flat year-over-year revenue growth. No discernible boost in holiday demand led to a 2% YoY growth in UVG. Kotak Institutional Equities said that topline growth is anticipated to be impacted by HUL's pricing reductions.

Price reductions in the laundry portfolio are predicted to cause the growth of the home-care category to slacken to 0.5% YoY. The growth of the beauty and personal care (BPC) category is also anticipated to slow to 0.8% YoY as a result of the price reduction of soap.

HUL's profits before interest, taxes, depreciation, and amortization (EBITDA) is anticipated to increase 1.3% annually to ₹3,581 crore from ₹3,537 crore at the operational level. Because of decreased prices for palm oil and other inputs, EBITDA margin is expected to increase by 77 basis points (bps) to 24.0% from 23.2% year over year.

Higher advertising costs will cause a slight increase in EBITDA margin, offsetting a 523 bps YoY increase in gross margin. PAT increase will correspond with EBITDA growth, according to Axis Securities.

Analysts predict that the expiration of the marketing agreement with GSK on November 1, 2023, may have an effect on HUL's Q3 results.

Also Read: RIL Q3 earnings preview: O2C business may continue to face pressure as digital and retail businesses increase profit and revenue

The December quarter saw a decrease in the cost of raw materials used by FMCG firms. Palm oil prices decreased 7.9% annually and 4.1% quarterly in Q3 of FY20, and they are predicted to increase after Q3 due to the possibility of El Nino lowering output. Palm fatty acid (PFAD) prices were down 6.6% quarter over quarter but remained constant year over year, according to brokerage company Prabhudas Lilladher.

Due to the drop in input cost prices, small, regional businesses are making a comeback and capturing market share by providing high-quality goods. Even though the incremental price reductions are minimal, businesses are boosting their advertising budgets and providing channels with more incentives in order to compete with local firms.

Future critical topics of interest will be the rivalry from regional and local businesses as well as HUL's assessment of demand in rural vs urban areas.

HUL shares were down 0.53% at ₹2,550.15 on the BSE at 2:30 pm.