HUL Q3 Results Preview: Revenue To Grow 3% Aided By Price Hikes

Hindustan Unilever Ltd. is expected to report single-digit growth in third-quarter earnings amid higher operational costs and sluggish demand.

The Surf Excel maker's revenue is expected to grow 3.3% year-on-year, according to a consensus estimate of analysts tracked by Bloomberg. It would be a price-led growth as the company took price hikes in tea and soaps.

HUL is expected to have taken a price hike of approximately 2–3% in the December quarter, following a period of stable prices in the second quarter.

Analysts expect revenue growth to be impacted due to continued subdued demand in urban markets owing to factors like food inflation, lower wage growth and deterioration in savings. However, rural markets are expected to gradually recover, with rural growth outpacing that of urban markets.

• Revenue seen up 3.3% at Rs 15,791.4 crore.

• Ebitda seen down 0.4% at Rs 3,651.5 crore.

• Margins seen at 23.1% vs 24%.

• Net Profit seen up 5.9% at Rs 2,657.5 crore.

Volumes may grow 1% during the quarter, marginally lower than 3% in the second quarter as consumers continue to downtrade to cheaper and smaller packs, especially in categories like soaps and tea amid price hikes.

Gross margins are expected to contract over the previous year due to an unfavourable product mix, with delayed winter impacting sales of high-margin personal care products. Also, hyperinflation in palm oil or palm fatty acids — a key input used in making soaps — as well as key agri commodities like tea, coffee and milk is adding pressure.

Despite high raw material prices, analysts expect HUL to sustain strong advertisement and promotions spending to stay competitive and drive volumes, which may lead to a decline in the Ebitda margin this quarter.

• Revenue is expected to grow 3% YoY on back of 1% volume growth versus 3% in Q2 and 2% price growth driven by price hikes in soaps, tea and adverse mix (rural and subdued winter portfolio).

• Ebitda margin likely to decline, mainly owing to higher input costs.

• Key monitorable: Demand outlook on rural versus urban, competitive intensity and raw material trends.

• Overall demand trends to remain similar to Q2 FY25.

• Downtrading is likely to hurt the underlying volume growth.

• Volumes are likely to increase 1–2% year-on-year, versus 2% in Q3 FY24 and 3% in Q2 FY25.

• In Q3 FY25, an exceptional item is likely in the form of sale of Pureit.

• Restructuring cost related to other business is expected at Rs 60-70 crore.

• Tea and soap prices shall increase due to inflation in input prices.

• Faster growth of small packs impacted product mix; winter portfolio underperformed.

• Expects 1% volume growth due to subdued urban demand and price hikes and 2% pricing growth mainly in soaps, tea.

• Price hikes won't fully offset sharp inflation in palm oil (impacting soaps, detergents, cosmetics) and tea, leading to margin decline.

• Rural versus urban demand outlook, nutrition performance, cost inflation remain key monitorable.

• Urban slowdown and increased competition across categories continue to weigh on demand.

• Hyperinflation in raw material index, particularly tea and PFAD, to weigh on gross margin.

• Higher royalty rate and termination of GSK consumer distribution contract to hurt margins.