High RM prices to dent HUL’s Q3 margins, revenues may rise up to 14% YoY


FMCG-heavyweight (HUL) is likely to clock up to 14 per cent year-on-year (YoY) revenue growth to Rs 14,900 crore in the third quarter of this fiscal year (Q3FY23) from Rs 14,751 crore in Q3FY22, pegged analysts. The consumer staples company will announce results after market hours on Thursday, January 19.

Higher advertising spends coupled with inflationary pressures, analysts said, are likely to squeeze EBITDA margins up to 154 basis points (bps) YoY to 23.9 per cent in Q3FY23 from 25 per cent in Q3FY22. However, calibrated price hikes, and sequential decline in raw material prices will help margins expand by 70bps quarter-on-quarter (QoQ) from 22.9 per cent in Q2FY23.

On the bourses, HUL underperformed peers as shares declined 5.08 per cent in Q3FY23. While Britannia was the only stock that delivered double-digit returns, shares of Dabur India, ITC, and Tata Consumer Products dropped up to 4.4 per cent during the quarter. In comparison, the S&P BSE FMCG index slipped 0.6 per cent, during the same period.

Key monitorables: Improvement in rural business, recovery in personal care, pricing actions and new launches strategy, sustainability of cost-saving measures, raw material trends, out-of-home home and discretionary categories.

Here’s a compilation of what top brokerages estimate for HUL’s Q3 numbers:

Axis Securities

Analysts expect the FMCG major to clock 12.4 per cent YoY revenue growth to Rs 14,720 crore, led by beauty and personal care (BPC), home care segment, and negative price hike in detergents. Though a sequential decline in raw material prices will aid EBITDA margins, up 70bps QoQ to 23.6 per cent in Q3FY23; it will, however, decline 145bps on a YoY basis, owing to higher ad-spends and inflationary pressures.

HDFC Securities

The brokerage firm estimates 5 per cent of volume growth would help grow revenues by 14 per cent YoY to Rs 14,900 crore in Q3FY23. Analysts model home care, BPC, and food businesses to register revenue growth of 26 per cent, 8 per cent, and 9 per cent, respectively. Softening of input prices would drive sequential improvement of gross margins by 240bps, while it would be down by ~400bps YoY, analysts said.

ICICI Direct

Analysts anticipate the FMCG giant to clock 5 per cent volume growth and 7 per cent pricing growth in Q3FY23. While home care is expected to register 23 per cent sales growth after company undertook price hikes in the past one year, BPC is expected to post 5.2 per cent sales growth after the company passed benefits of declining palm oil prices via price cuts in soaps in October 2022. Food and refreshment segment, meanwhile, is expected to see 2.3 per cent growth, driven by price deflation in tea segment.


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