HUL Q1 Preview: Pat will probably push 1% yoy; Gedempte question to weigh margins

Hindustan Unilever LTD (HUL) is expected to report a soft series of figures for the quarter of June, with profit after tax (Pat) that will probably fall 1% on an annual basis and the turnover is estimated to grow by approximately 4%, according to an average of five broker estimates.

While the recovery of volume is underway, heavy promotional activity and deflation in the home care segment are seen as dragging on profitability.

Volume growth return, but the prices remain lukewarm

Most brokerages project the basis of volume growth (UVG) with around 3% yo-y, powered by improved grammar resources in home care and a pick-up in the rural question. Phillip Capital expects the company’s volume-guided strategy, although aggressive price price interventions could weigh on value growth.

Kotak notes that the demand conditions remain largely unchanged compared to the previous quarter, whereby the rural question continues to surpass the urban. It expects 3% UVG, led by food and drinks and a light rebound in beauty and personal care (BPC), supported by price increases in soap.

Gross margins under pressure despite costs –

Despite some moderation in palm oil and soap noodles prices at the end of the quarter, the gross margins are expected to contract yen. Motilal Oswal reflects this image and marks a 140 BPS Yoy erosion due to intensified consumer offers and calibrated prices in important categories such as skin cleaning and tea.

EBITDA -Marge presses in the midst of raised A&P outputs

The EBITDA margin is expected to remain within the accompanying reach of the company of 22-23%, but Yoy is falling. Analysts attribute this to advertisements and promotional investments (A&P) investments, trade discounts and weaker operational leverage due to fixed costs.

Kotak expects the EBITDA margin at 22.4%, while Nuvama sees it slightly higher with 22.8%. Motilal Oswal also anticipates margin pressure, powered by higher A&P editions and a shift in the product portfoliomix.

Pat Seen Dal Dealing as a result of minimalist acquisition payment

The bottom line is that the average expectation is a decrease of 1% yoj in net profit. Kotak and Nuvama note that the recent acquisition of minimalist will influence a different income, so that the net income will be put under pressure after the EBITDA departure.

What to view

Investors will concentrate on the outlook of management for volume supply, the momentum in the countryside and inflatoire trends in raw materials such as PFAD.

((Indemnification: Recommendations, suggestions, views and opinions of the experts are their own. These do not represent the views of economic times)