HUL Q3 Results Review - Marginal Miss On Estimates: Systematix

Systematix Research Report

Hindustan Unilever Ltd. delivered earnings marginally below our muted expectations with soft topline performance and gross margin improvement being ploughed back to increase advertising and promotion spends resulting in flattish earnings.

Revenue growth fell short of expectations with a decline of 0.3% YoY while Ebitda/ adjusted profit after tax stood at +0.1%/-2.2% YoY respectively.

Volume growth at 2% was lower than the market volume growth of 9% given decline in segments like tea, health food drink and detergents indicating a combination of market share loss to regional players and consumer downgrading given cumulative inflation.

But HUL maintained its share gains on a two-year basis growing volumes at 4% versus 2% for industry. While home care and beauty and personal care grew volumes in mid-single digit, foods saw a low-single digit volume decline.

A superior mix and continued cool-off in material inflation (especially crude and palm-related) led to sharp gross margin expansion of 401 basis points to 51.5% albeit Ebitda margin remained flat at 23.3% given 270 bps increase in ad spends and 149 bps increase in other expenses given higher investments and royalty increase.

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