Hindustan Unilever - Q3FY21 First Cut - ICICI Direct

(CMP - Rs. 2385, MCap - Rs. 5,63,800 crore)

Hindustan Unilever's (HUL) Q3FY21 numbers were in line with estimate on revenue, margins & earnings front.

Q3FY21 Earnings Summary

- Revenue grew by 20.9% to Rs. 11862 crore (I-direct estimate : Rs. 11322) largely led by consolidation of acquired nutrition business (Horlicks, Boost). Domestic sales growth was 7% (on a like to like basis) led by 4% volume growth. Health, Hygiene & nutrition which constitute 80% of the portfolio continue to witness strong double digit sales growth whereas rest 20% of the portfolio (discretionary) has come back to the pre-Covid levels sales. Home care segment (largely detergent) continue to post muted sales with 1.4% decline. Beauty & Personal care segment witnessed 9% revenue growth aided by price hikes taken in personal wash category. Foods category (like to like) witnessed a strong growth of 19% largely driven by price hike in tea after the tea procurement prices risen sharply in last six months

- The company has been able to maintain its gross margin (20 bps contraction) at 54% despite sharp increase in tea & palm oil prices. It has taken selective price increase to pass on most of the inflationary cost in last four-five months. It also maintained its advertisement spends at 11.7% which was in line with the sales growth however, overhead spends saw increase of 72 bps (% to sales) during the quarter. Operating profit increased by 16.7% to Rs. 2853 crore & operating margins contracted by 88 bps to Rs. 24.1% (I-direct estimate 24.2%)

- Led by higher operating profit, net profit grew 18.8% to Rs. 1920 crore (I-direct estimate Rs. 1914 crore)

Given, detergent category has seen sluggish sales post pandemic period due to reduced out of home activity (many schools, offices are still largely functioning from home), the home care segment (1/3rd of sales) continues to report negative sales trends. Even Beauty & Personal care & Foods segment saw growth trend largely due to price hikes in soaps & tea categories. It has taken ~2-3% price increase in December as well as January in soaps category to pass on palm oil inflation. We believe pricing would continue to contribute to the growth in next few quarters given sharp cost inflation. Further, detergent category would still take some time to revive given schools, offices are yet to start functioning fully. We believe new product launches, ecommerce sales & channel inventory levels would be key to determine volume growth going forward.

We will be coming out with detailed update post the conference call with management.

Shares of HINDUSTAN UNILEVER LTD. was last trading in BSE at Rs.2390.75 as compared to the previous close of Rs. 2398.9. The total number of shares traded during the day was 137939 in over 6537 trades.

The stock hit an intraday high of Rs. 2421 and intraday low of 2334.85. The net turnover during the day was Rs. 326030619.

Source : Equity Bulls

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