HUL Q1 Result Review: Ebitda, Revenue Misses Prompt Analysts To Trim Earnings Estimates
The standalone net profit of the company rose 8% to Rs 2,472 crore.
Hindustan Unilever Ltd. reported a rise in net profit for the first quarter of FY24. However, the company's operating profit and revenue missed estimates, prompting analysts to reduce their earnings per share forecast.
The company's standalone total sales rose 7% to Rs 14,931 crore in the quarter ended June, according to an exchange filing. The net profit increased 8% year-on-year to Rs 2,472 crore during the quarter.
The company intends to ramp up its advertising spends aggressively in the quarters ahead, to shore up volumes that rose at the slowest pace in five quarters, as higher prices deterred consumers.
The results underperformed previous brokerage estimates.
Key Takeaways From Brokerage Reports
Kotak Institutional Equities
Gave an "Add" rating, with a revised fair value of Rs 2,835, up from Rs 2,750 previously.
Q1 sales and underlying volume growth stood of 7% and 3%, respectively, falling 210/250 basis points below estimates. The weaker performance was primarily due to challenges in beauty and personal care and food and refreshments segments.
The near-term outlook for HUVR is muted because of the timing mismatch between price cuts and the associated volume growth recovery, as well as an increase in advertising and promotion spends, influenced by competitive intensity and gross margin recovery.
The management's commentary on rural markets was mixed, considering weather-related risks.
The growth in Q1 was impacted by trade destocking due to price cuts, consumer preference for high-cost inventory, and the resurgence of smaller players in certain categories.
Gross margin beat estimates at 49.9% due to softening raw material prices, but Ebitda slightly missed estimates, attributed to higher-than-expected other expenses that grew 20% YoY.
The brokerage trimmed EPS estimates by 1-2% and revised the fair value to Rs 2,835, implying a 50x September 2025E price-to-earnings multiple.
JPMorgan
Maintains an "overweight" rating and revised the price target to Rs 2,850 from the previous Rs 2,750.
HUVR's Q1 Ebitda was in line with estimate, but 3% below consensus. Revenue missed estimates and street expectations by 1-2%, due to lower volume growth.
The near-term growth rates are expected to be impacted by price deflation and a lag in volume growth recovery, with the second half of FY24 likely to witness better volume and margin improvement.
Home care saw double-digit growth in fabric wash, with the premium segment performing well. Household care was driven by double-digit volume growth in dishwash cleaners.
Hair care grew, while oral care saw high double-digit growth, led by the Closeup portfolio.
Skin cleansing experienced low single-digit volume growth, considering price corrections, while skin care and color cosmetics grew doble-digit, driven by volume growth.
JPMorgan maintains its FY24 EPS estimates and has set a new September 2024 price target of Rs 2,850, based on a 52x one-year forward P/E multiple, in line with its average pre-pandemic valuations.
Morgan Stanley
Maintains 'equal-weight' rating, with price target of Rs 2408.
Headwinds from weaker volume growth environment, media investments and lower pricing growth to weigh on growth and margins.
HUL's Q1 revenue and profit results underperformed estimates by 3% and 5%.
Volume growth missed brokerage estimates by 3%.
Advertisement and promotional spend increased by 110 basis points quarter-on-quarter and company will continue to invest in this expense.
Price growth estimated to be flattish/negative in coming quarters.
Home care increased 10% YoY and remained the best-performing segment—a trend for the past eight quarters.
Gross margin increased by 140 bps and will continue to improve.
Rural demand drivers remain positive, but weather related risks remain.
Jefferies
Downgrades to 'hold' with a revised lower price target of Rs 2770 from a previous target of Rs 2875.
FY24-25 earnings per share estimates cut by 1-3%.
Q1 Ebitda growth of 8% is 3% below brokerage estimates.
Price inflation still impacting food and refreshment segment, which has lead to slow volume growth.
Re-entry of local and regional players has picked up competitive intensity in market segments like tea, laundry and soaps
Oral care, hair care and laundry reported mid-single digit growth levels.
Skin care and cosmetic segments witnessed high single digit growth levels.
