HUL Q3 results preview: Subdued show to continue on muted demand, weak pricing environment
HUL) is expected to report muted numbers for the quarter ended December in the backdrop of weak volume growth, price cuts, and rising advertising costs.
India’s bellwether in the fast-moving consumer goods sector is expected to report a 6% year-on-year (YoY) growth in net profit to Rs 2,653 crore, on the back of a moderate 1% growth in revenue to Rs 15,378 crore, the average of estimates given by 13 brokerages showed.
Sequentially, the bottomline is seen falling 2.4%, while the topline growing at a moderate 0.7%.
The ‘Lux’ soapmaker is scheduled to release its earnings for the third quarter on Friday.
Uneven rainfall, a warmer-than-expected winter, and subdued rural demand despite an extended festival season affected volume growth in the quarter gone by.
As a result, HUL is widely expected to report a mere 2% growth in volumes in the December quarter on a base of 5%.
This will be similar to that seen in the September quarter and would be the slowest growth that the FMCG major has seen in five quarters.
“Volume growth is likely to remain anaemic on no material change in discretionary demand despite a festive quarter. Pricing has also started being in the negative zone, pulling down overall value growth,” Nomura Financial said in its note.
Price cuts in the mainstay soaps category are also likely to weigh on the topline. The overall prices in the soaps category is likely to have fallen 2% YoY, according to Kotak Institutional Equities.
Nuvama Institutional Equities anticipates the urban market to outpace the rural, which may see HUL’s premium segment doing better than the mass end. However, urban may not overshadow rural completely, given that the latter makes for more than half of the volume growth for FMCG
