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HUL Q2 preview: Analysts see PAT growth between 8-10%, margin pressure

Fast-moving consumer goods (FMCG) maker Hindustan Unilever (HUL) is likely to post low double-digit growth in September quarter revenue between 10 per cent and 15 per cent, said analysts. Better underlying consumer demand versus the previous quarters, resilience in the rural markets and strong recovery in both home care and beauty & personal care categories from low base quarters are likely to drive revenue growth.

On the profit front, analysts estimate an 8-10 per cent yearly jump in net profit for the second quarter ended September 2021 (Q2FY22), as operating margins are likely to stay under pressure.

"We believe FMCG companies would continue to witness structural mid to high single-digit volume growth. Most companies have taken 5-15 per cent price hikes in previous quarters to withstand commodity price inflation. Our coverage universe is expected to witness a 13.7 per cent revenue growth led by an equal mix of volumes and pricing growth," analysts at ICICI Securities said.

Here's a look at what leading brokerages are pencilling in from HUL's Q2 show:

ICICI Securities
The brokerage expects HUL to post revenue growth of 14.8 per cent year-on-year (YoY) at Rs 13,132 crore as against Rs 11,442 crore reported in the corresponding quarter year-ago, while on a sequential basis, the figure could rise by 10.2 per cent. It stood at Rs 11,915 at the end of the June 2021 quarter.

"HUL is likely to witness strong on the back of a recovery in-home care & beauty & personal care (BPC) segment. The base quarter revenue growth was flattish for these segments. The acquired nutrition business is part of the foods & refreshment segment. We expect 10.5 per cent, 15.7 per cent & 11.3 per cent sales growth in-home care, beauty & personal care and foods segment, respectively," the brokerage said in an earnings note.

We estimate 100 bps gross margins contraction with a steep increase in commodity costs and the operating margins are likely to see a 124 bps contraction in Q2FY22, the brokerage added. It pegs net profit growth at 10 per cent YoY to Rs 2,210.2 crore. On a quarter-on-quarter (QoQ) basis, it could increase by 7.2 per cent as against Rs 2,061 crore.

Kotak Institutional Equities (KIE)
This brokerage models a 10 per cent YoY (5.5 per cent QoQ) revenue growth with 5 per cent YoY growth in underlying value at Rs  12,575.1 crore. The growth, it said, would be led by marginally better underlying consumer demand versus June 2021 quarter, continued resilence in rural demand, fading tailwinds for hygiene portfolio and a gradual uptick in OOH (out of home) and discretionary portfolios along with increased media intensity.

The brokerage forecasts a 13 per cent YoY growth in Homecare, 9 per cent YoY growth in BPC and 8.2 per cent revenue growth in F&R (food and refreshment) portfolio aided by tea price hikes.

Further, it projects a 200 bps YoY contraction in gross margin due to inflationary pressures and 55 bps QoQ improvement aided by price hikes. It pegs its EBITDA margin at  24.7 per cent, down 40 bps YoY and up 80 bps QoQ. The profit for the quarter is likely to increase by 8.6 per cent yearly and 5.8 per cent sequentially to Rs 2,181.3 crore.

Motilal Oswal Financial Services (MOSL)
Profit projections of MOSL are mostly in line with KIE at Rs 2,182.2 crore. The brokerage believes commentary on distribution and GTM (go-to-market) integration for the Nutrition business will be key things to watch out for. Outlook for competitive intensity, raw material costs, discretionary, and out-of-home demand are among key monitorables, it said.

On the revenue front, the brokerage eyes a 10 per cent YoY growth at Rs 12,585.4 crore. Meanwhile, sequentially, it could increase by 5.6 per cent. The brokerage further expects a domestic volume growth (incl. GSKCH) of 6 per cent YoY. Gross margins it said can contract by only 30bps YoY, despite higher material costs, on price increases and a favourable mix.

Axis Securities
Analysts at Axis Securities say led by improved traction in OOH/Personal Care segments, resilient rural demand and improved contribution from GSK-CH business, HUL's Q2 revenue could rise 9.7 per cent YoY and 5.4 per cent QoQ to Rs 12,556 crore.

PAT, they said, will be higher in line with improved EBITDA performance at Rs 2,171 crore, up 8.1 per cent yearly. "EBITDA Margin to contract 50 bps YoY owing to gross margin contraction. However, price hikes, tailwinds from GSK-CH integration and cost savings to curtail the margin decline," the brokerage said.

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