Q2 result review: ITC vs HUL - which stock to buy post earnings
Hindustan Unilver Ltd (HUL) and ITC Ltd Q2 performance did reflect the challenges being faced by industry on volume growth due to higher competitive intensity, weak rural demand and so on. For HUL the impact on earnings was higher in Q2 compared to ITC that sees its other businesses as Hotels, paper etc providing cushion to its earnings. The solace for companies, however, comes from declining raw material prices that are supporting margins.
Share prices of HUL and ITC were down 2% and even more on Friday in morning trades. For HUL the impact of lower input cost inflation was visible in the September quarter results and sharp improvement in gross margins lifted its overall operating performance. The company reported Ebitda margins at 24.6% improved 130 basis points year-on-year.
Ebitda stands for Earnings before interest tax depreciation and amortisation, while 100 basis points make a percent. The revenue growth and volume growth stood at just 4% and 2% respectively for HUL. The improvement in operating performance meant that HUL profits before exceptional items at ₹2,668 crore improved 12% year-on-year.
The analysts at Jefferies India private Ltd reacting to HUL results said that, the pitfall showed up in higher competitive activity visible in the increase in media spends along with HUL trailing industry growth. Lower product prices have yet to induce customers to consume more, partly reflecting a tough macro. Hence Jefferies view on outlook is cautiously optimistic.
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