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Yes Securities Report
Hindustan Unilever Ltd.'s Q2 FY24 performance excluding one-offs was in-line with our estimate. Underlying volume growth for Q2 FY24 came at 2% [five-year compound annual growth rate at ~3% (calculated)] below estimate of 3%.
HUL's growth continues to be led by urban, while rural remains subdued. Management remains cautiously optimist but equally confident about continuous gradual recovery of demand going forward.
Moderating inflation, resilient urban demand, festive season entirely in Q3 will be key factors for volume recovery. Gradual volume improvement along with slight negative price growth will result in subdued revenue growth for one more quarter, we believe.
Sequential gross margin improvement continues to support operating performance but is restricted due to increase in key operating costs like adverting, sales and promotions (much needed to support demand, tackle competition and to fund innovations).
There is minor downwards revision in our FY24E/FY25E earnings.
Due to recent correction and estimation of healthier earnings delivery in H2, we upgrade our rating to 'Add' (Neutral' earlier) with a revised target price of Rs 2,855.
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