Analysts suggest that a surge in rural demand and intense summer weather have likely bolstered demand in Q1FY25, particularly in product categories associated with the season.
Additionally, with a forecast for a ‘normal’ monsoon and diminishing impact from previous price adjustments, analysts believe, HUL is expected to experience an uptick in revenue momentum.
Earlier this week, Hindustan Unilever approved the sale of its water purification business to AO Smith India for an Enterprise Value (EV) of Rs 601 crore or $72 million. The strategic move, HUL said, is aimed at sharpening the company’s focus on its core product categories.
Meanwhile, here’s a look at what brokerages expect from HUL in the June quarter:
Emkay
According to analysts at Emkay, Hindustan Unilever (HUL) is expected to achieve volume-driven growth in Q1FY25, with pricing ranging from a low-single-digit decline to low-single-digit growth.
In a stable demand environment, analysts anticipate moderate sequential improvement in HUL’s growth trajectory. Emkay forecasts approximately 1 per cent growth in revenue, supported by a 2.5 per cent increase in volume.
The impact of a harsh summer is likely to affect HUL’s Food portfolio, particularly categories such as tea, coffee, and functional nutrition drinks.
Price adjustments in soaps and the anniversary effect of price hikes in nutritional drinks are expected to result in a low-single-digit price decline. Emkay notes that while gross margins may moderate quarter-on-quarter (QoQ), they are anticipated to expand by 160 basis points year-on-year (YoY) to 51.5 per cent.
Moreover, Emkay predicts a revenue of Rs 15,256.6 crore, up 1 per cent Y-o-Y; Adjusted PAT at Rs 2,562.1 crore (up 2 per cent YoY); Ebitda at Rs 3,607.3 crore (up 2 per cent YoY); and a YoY expansion of 40 basis points in Ebitda margin to 23.6 per cent.
Motilal Oswal
Motilal Oswal analysts believe that volume growth for HUL has reached its lowest point and foresee a gradual recovery in volumes during FY25. They expect HUL to benefit from its extensive product portfolio and market presence across various price segments, supporting steady growth as the recovery unfolds.
Certain segments within Beauty & Personal Care (BPC) and Foods & Refreshments (F&R) are identified as having potential for turnaround. Analysts will closely monitor how the new CEO addresses these opportunities.
Regarding valuation, Motilal Oswal considers HUL’s current price-to-earnings ratio of 47x FY26E earnings per share (EPS) reasonable, especially when compared to its five-year average price-to-earnings (P/E) of 60x based on one-year forward earnings.
Thus, Motilal Oswal expects HUL to achieve revenue of Rs 15,553 crore, reflecting a marginal 0.4 per cent year-on-year increase. They anticipate Ebitda of Rs 3,711.3 crore, up by 1.3 per cent year-on-year, and net profit to amount to Rs 2,643.2 crore, indicating a 2.4 per cent increase year-on-year.
Anand Rathi
Analysts at Anand Rathi anticipate sustained gross margin expansions, benefiting from recent declines in crude oil prices and favourable pricing of other key commodities.
Earnings before interest, taxes, depreciation and amortisation (Ebitda) margins are expected to continue their upward trajectory, albeit at a moderate pace, as companies prioritise investments in brand-building activities.
Consequently, Anand Rathi projects revenue of Rs 15,304.3 crore, reflecting a 2 per cent year-on-year (Y-o-Y) increase. They forecast an Ebitda margin of 24.2 per cent and adjusted profit after tax (Adj. PAT) to rise to Rs 2,659.5 crore, marking a 6 per cent growth year-on-year.
InCred Equities
According to analysts at InCred Equities, the overall demand trend for FMCG is expected to improve marginally, with a gradual improvement likely in rural markets while urban markets maintain their growth momentum.
Thus, analysts at InCred Equities expect HUL to post a revenue of Rs 15,057.7 crore, Ebitda of Rs 3,493.4 crore and a net profit of Rs 2,455.6 crore
First Published: Jul 19 2024 | 9:43 AM IST
