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- 21 Jan 2022
- ICICIdirect Research
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HUL REPORTS MUTED VOLUME GROWTH IN Q3FY22
HINDUNILVR - 2333 Change: -2.80 (-0.12 %)News: HUL reported revenue growth of 10.4% to Rs.12900 crore on the back strong growth in home care segment given sales is base quarter was sub-par due to lower detergent sales (impacted by lack of out of home activity). Further, aggressive price hikes were taken in last six months to pass on the high commodity inflation. Volume growth was muted 2% (but on expected line). Home care, Beauty & personal care (BPC) & Foods business saw a growth of 23%, 6.9% & 3.3% respectively. Gross margins contracted by 186 bps due to elevated palm oil & crude prices. The company reduced its marketing spends by 262 bps (as % to sales) along with 56 bps savings in overhead spends. This resulted in operating profit growth of 14.9% to Rs.3279 crore. Operating margins expanded by 100 bps to 25% considering the base quarter margins was low due to high inflation in tea. Net profit grew by 16.8% to Rs.2243 crore after Rs.66 crore exceptional expense related to restructuring & disposals .
Views: The volume growth for the company has slowed down to 2% and larger part of the growth is contributed by prices. With the sharp increase in raw material prices, the company had to resort to aggressive price hikes to protect the margins. We believe higher prices have impacted the growth of some of the discretionary categories. Moreover, we believe crude based raw material prices & palm oil prices specifically have remained at an elevated levels, which would keep the gross margins under pressure in medium term. The long term growth levels are intact with many categories witnessing consumption shift from unbranded to braded & expansion of direct distribution network in smaller towns & rural India. However, near term challenges related to raw material prices is likely to impact margins as well as growth in discretionary categories.
Impact: Neutral