HUL Q3 earnings today; expect better volume, higher margin

NEW DELHI: Hindustan Unilever is likely to report an annual 9-11 per cent rise in sales for the December quarter riding on a 7-9 per cent volume growth. Margins are expected to expand 150-300 basis points, with profit growth anywhere at 18-27 per cent. The management commentary on performance of Lever Ayush and rural recovery other than the volume growth and broader consumer demand environment would be key monitorables.

Brokerage HDFC Securities expects the FMCG major to report an 11 per cent growth in sales, with domestic volume growth of 8.5 per cent YoY.

"EBITDA margin (is expected) to expand by 161 bps YoY to 19.2 per cent on a favourable base as margin had contracted by 83 bps in the year-ago quarter," the brokerage said.


The owner of soap brands Lux and Dove had reported 4 per cent volume growth in July-September on an annual basis and
a de-growth of 4 per cent in the year-ago quarter.

"We expect Hindustan Unilever’s revenue to grow 9 per cent YoY, with underlying domestic volume growth of 7 per cent in Q3 FY18. Gross margins are likely to expand 200 bps YoY to 53.4 per cent. We expect operating margin to expand by 150 bps YoY to 19.1 per cent in Q3 FY18, leading to Ebitda growth of 18.3 per cent YoY. Adjusted net profit is likely to grow 18.7 per cent YoY to Rs 1,090 crore in the quarter," Motilal Oswal Securities said in a note.

Cost efficiency gains and premiumisation will continue to drive margin expansion, said Prabhudas Lilladher. This brokerage expects a 9 per cent YoY increase in sales growth for the FMCG firm on 6 per cent increase in volumes.

Margin may expand by 320 bps it said while estimating adjusted profit after tax at Rs 1,170 crore, up 27.3 per cent YoY.

According to Prabhudas Lilladher, the shares of the company are likely to gain, going ahead, from the expected pick-up in rural demand, lower GST rates on more than 2/3rd of its portfolio and benefits from sustained cost savings programmes.