ECONOMY

HUL’s Margin To Come Under Pressure Even Amid Price Hikes

Hindustan Unilever Ltd.‘s revenue is expected to grow marginally aided by price hikes, but its margin may come under pressure amid rising raw input costs.

Revenue of India’s largest consumer goods maker is expected to rise 0.3% sequentially at Rs 12,168.4 crore, according to a consensus forecast of analysts tracked by Bloomberg.

“Sales in the health food category (Horlicks/Boost) will grow on the back of strong distribution network of HUL,” KR Choksey said in its preview report on HUL. It said rural demand has also shown signs of revival as the distribution network under the company’s “Project Shakti” programme has doubled in FY21.

Net profit is expected to rise 3.1% sequentially to Rs 2,211.2 crore, according to estimates, while operating margin is projected at 24.8% compared to 24.4% in the previous quarter. In the comparable quarter last year, margin stood at 25%.

HUL hiked the prices of its tea, shampoos and soaps in the quarter ended June.

Emkay Global expects margins to remain flat on a weak base last year amid higher input inflation from palm oil, tea and crude oil.

Others expect its demand pipeline to remain steady. “We expect steady demand trends in staples given modest supply-chain disruption during the second wave of Covid-19,” Kotak Institutional Equities said in its preview note on the sector.

What To Watch Out For:

  • Guidance for volumes and price in FY21.

  • Impact on premiumisation and new product launches.

  • Supply disruptions for raw materials and corresponding impact on cost.

  • GSK Consumer portfolio performance.

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