Hindustan Unilever Q3 Review — Performance Subdued, All Eyes On Rural Recovery: Motilal Oswal

Motilal Oswal Report

Hindustan Unilever Ltd.'s performance was below expectations in Q3 FY24. The company reported a 2% volume growth (estimate of 2%) and nearly flat revenue growth (estimate of 4%). Volume recovery is being delayed, especially in rural areas, despite price cuts and consumer promotions.

The trend of urban growth outpacing rural areas, and the premium segment outperforming the mass market, has continued.

The benign raw material inflation continued to drive gross margin (up 400 basis points YoY, down 100 bp QoQ), despite partial benefits being passed on to consumers. The gross profit was up 8% YoY; however, higher A&P (up 35% YoY) offset the benefits and resulted in flat Ebitda.

Management is increasing brand investments to stimulate volume growth in preparation for the volume recovery phase and to counter local competition.

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