HUL Q4 Results Preview: Profit May Dip As Revenue Seen Muted On Price Cuts, Weak Demand
The company's net profit may have slipped 3.2% on muted revenue growth of 1.4% in the quarter ended March 2024, according to a consensus estimate of analysts tracked by Bloomberg.
Hindustan Unilever Ltd. may report muted fourth-quarter earnings amid higher operational costs and sluggish demand. The company's net profit may have slipped 3.2% on muted revenue growth of 1.4% in the quarter ended March 2024, according to a consensus estimate of analysts tracked by Bloomberg.
HUL Q4 FY24 Results Preview (YoY)
Revenue seen up 1.4% at Rs 15,156.7 crore.
Ebitda seen down 2.7% at Rs 3476.2 crore.
Margins seen at 23% vs 23.9%.
Net Profit seen down 3.2 % at Rs 2517.2 crore.
Analysts expect Q4 volumes to grow by 2–3%, reflecting a similar trend seen in the last few quarters as rural demand remains a concern.
Higher royalty payouts and the GSK deal expiration would hurt HUL's operational performance during the quarter. The pace of margin expansion is likely to moderate with a focus on higher advertising spends, analysts said.
This is the first quarter where the impact of the second increase in royalty payments will be felt.
Last year, HUL decided to raise the royalties paid to its parent company, Unilever Plc. Under the new agreement, the royalty and central services fees will see a gradual increase of 80 basis points over a 3-year period, bringing the total turnover percentage from 2.65% to 3.45%. The first increase of 45 basis points took effect from February to December 2023, followed by a second increase of 25 basis points from January 2024 to December 2024.
Here's What Brokerages Say
Axis Securities
Revenue is expected to grow moderately at 1% year-on-year (3% volume growth and 2% price cut) on account of subdued performance across categories.
Ebitda margin is likely to remain flat owing to higher ad spends, higher royalty payments, and an offsetting gross margin expansion of 410 basis point YoY.
Key Monitorable: Demand outlook on rural vs. urban; competitive intensity; raw material trends
Nuvama Institutional Equities
HUL's Q4FY24 revenue is expected to grow 1% YoY and dip 1% QoQ at Rs 14,784.4 crore, while Ebitda and net profit are expected to dip 2% and 4% over last year to Rs 3,400 crore and Rs 2,458.1 crore, respectively.
Volumes are expected to grow by 3% over Q4 FY23, driven by a 2% dip in prices.
Demand trends are expected to be similar to Q3 FY24, with marginal improvement in rural (across categories) on a two-year basis.
For HUL, urban continues to grow faster than rural, while premium continues to do better than mass.
The Ebitda margin is expected to decrease by 70 basis points year-on-year due to the high A&P and the second round of increases in royalty. GSK consignment arrangement expiry is likely to have a Rs 60–75 crore impact on operating income.
Motilal Oswal
HUL's wide product basket and presence across price segments should help the company achieve a steady growth recovery.
There is scope for a turnaround in parts of beauty and personal care (BPC) and food and refreshment (F&R). The execution of these segments under the new CEO will be monitored.
HUL's valuation at 45x FY26E earnings per share is reasonable given its last five-year average price-to-earnings of 65x on one year forward.
Volume growth has bottomed out and anticipates a gradual volume recovery in the financial year 2025.
Expects HUL to post a profit of Rs 2,507.6 crore, Ebitda of Rs 3,542 crore, and sales of Rs 15,363.9 crore in the March quarter.
Kotak Institutional Equities
Home care segment to grow at 0.3% YoY, while BPC growth to be flat owing to anniversarisation of some price cuts in soaps; delayed onset of winter (30% of skincare portfolio) would have benefited offtakes and helped clear some channel inventory. F&R is expected to grow by 1.2%.
Expects a 70% decline in other operating income over the previous year due to the discontinuation of GSK Consumer Healthcare's over-the-counter distribution business in November 2023.