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Dolat Capital Report
Hindustan Unilever Ltd.'s core business registered 11% sales growth in Q4 FY22 led by ~10% price increase. Volume growth was flat.
Food and refreshment division reported muted 5.3% revenue growth on a high base of 96% growth. Nevertheless, 290 basis points expansion in Ebit margin – was a positive surprise.
New product launches in this segment witnessed positive response across the domestic market.
Increase in raw material prices and delayed/restrictive price pass on resulted in 300 bps contraction in gross margin. However, lower advertising and promotion spends and better operating efficiency helped restrict operating profit margin contraction at 30 bps.
Given the persistent raw material inflation, gross margin is likely to remain under pressure in the near term. However, HUL is likely to benefit once the commodity price trend reverses, as price pass on would be limited.
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