HUL remains a good bet

HUL posted double-digit volume growth for the fifth consecutive quarter, making it a business-as-usual quarter for the FMCG bellwether. The unusual aspect was the company posting 10 per cent volume growth on a high base of 11 per cent growth a year ago.

The growth was broad-based across categories. The three major categories — home care, personal care and food & refreshment — registered double-digit growth in revenues. Volatility in the crude oil prices led to a raw material cost bill of 47 per cent of revenues, which was lower on a sequential basis, but higher than the year-ago level.

Price increases of 2-3 per cent, savings on advertising and employee cost (as a proportion to sales from the year-ago level) enabled the company to improve its profitability. The EBITDA margin was up 170 bps. Ad spend stood at 12.6 per cent of revenues against the yearago spend of 13.3 per cent. Employee cost stood at 4.9 per cent of revenues against 5.9 per cent a year ago. The rural demand has been strong in the near term.


Premiumisation has been one of the cornerstones of HUL’s growth strategy in India for the past several quarters. It has been a secular consumer trend in India that HUL has been riding to improve its profitability. The company is now premiumising its range of watfr purifiers in a bid to improve the sluggish performance of the category.

According to the company’s management, the demand outlook is stable in the near term. It will be monitoring the input cost volatility as well as demand scenario ahead of the general elections, and the focus would be on maintaining volume-driven growth and improve profitability.

Post the Q3 results, the price-to earnings multiple of the HUL stock has decreased to 64.7, making room for a marginal upside.

For long-term investors, HUL continuing its strong growth momentum with no major worries on the cards is excellent news. Stretched valuations, nevertheless, remain a worry -- though less grim till the company continues to deliver.