Hindustan Unilever trades lower for third straight day ahead of Q4 results

According to analysts, most consumer goods companies would have taken a hit during the quarter under review due to Covid-19 lockdown
Shares of Hindustan Unilever (HUL) were trading lower for the third straight day, down 3.2 per cent to Rs 2,160 on the BSE on Thursday ahead of the announcement of its financial results for the quarter and year ended March 2020 (Q4FY20) later in the day.

In the past three trading days, the fast moving consumer goods (FMCG) firm's stock has slipped 7 per cent, as compared to 6 per cent rise in the S&P BSE Sensex. With today’s fall, HUL has corrected 17 per cent from its record high level of Rs 2,614, touched on April 8, 2020.

In Q4FY20, HUL's stock outperformed the market by rallying 20 per cent, against nearly 29 per cent decline in the Sensex.

According to analysts, most consumer goods companies would have taken a hit during the quarter under review due to Covid-19 lockdown, which has caused enormous logistical issues. Companies with higher exposure to food and daily essentials, analysts say, are expected to fare better this quarter as compared to those with a skew towards discretionary consumption.

Analysts at Kotak Institutional Equities expect HUL to post 2 per cent revenue growth in domestic FMCG business led by 2.5 per cent underlying volume growth (UVG) and flat pricing. The brokerage firm expects HUL to have minimized impact of Covid-19 by planning in advance and stocking up channel in anticipation of potential upstocking by consumers ahead of lockdown.

“We expect 350 bps yoy expansion in EBITDA margin aided by gross margin expansion (100 bps), operating efficiencies (150 bps) and adoption of Ind-AS (100 bps). Net profit would be aided by cut in corporate tax rate,” analysts said in results preview.

“We estimate a decline of 3 per cent in sales driven by volume decline of 3.5 per cent. The home care to grow at 1 per cent; personal care is expected to remain weak (-8 per cent growth vs. -3 per cent in Q3). The lower crude prices, decline in ad spends and cost savings to aid margin expansion. PAT growth also driven by benefit of lower effective tax rate,” Emkay Global Financial Services said in Q4 preview.

At 2 pm, HUL was trading 2.8 per cent lower at Rs 2,170 on the BSE, against 2.7 per cent rise in the S&P BSE Sensex. The trading volumes on the counter nearly doubled with a combined 6.2 million shares changing hands on the NSE and BSE so far.


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