HUL Q3 Results Review - Core Performance To Improve Here On: Dolat Capital
Increase in royalty would pressurise Ebitda margins, going ahead.
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Dolat Capital Report
Hindustan Unilever Ltd.’s results came inline with estimate. Core business registered 16% sales growth in Q3 FY23 led by ~11% price increase and volume growth of 5%.
Personal care segment reported mere 11% revenue growth due to delayed monsoon. Going ahead, we believe that the segment would bounce back in Q4 and post improvement.
Increase in raw material prices and delayed/restrictive price pass on resulted in 460 basis points contraction in gross margin.
However, better operating efficiency helped restrict operating profit margin contraction at 180 bps. Recent softening in select commodity prices is likely to benefit HUL in the ensuing quarters. However, increase in royalty would pressurise Ebitda margins, going ahead.
We have marginally tweaked our FY24/25E earnings per share estimates to factor in positive impact of expected improvement in gross margin but negative impact of increase in royalty.
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