HUL - Near-Term Outlook Circumspect, But Strong Long-Term Positioning To Drive Outperformance: Systematix

Systematix Research Report

We came back impressed with Hindustan Unilever Ltd.’s strategy for the next decade, set out in its 2022 Capital Markets Day. Q2 result was a mixed bag with decent growth, offset by significant impact on margins.

However, the near-term commentary on demand and margin recovery remains circumspect, with no visible signs of a turnaround. A structural reversal in commodity inflation and Indian rupee depreciation remain key drivers for volume and margin recovery.

Nonetheless, HUL handled the prevailing environment quite well, surpassing market growth rates and limiting the impact on its margins.

Successful premiumisation, innovation and market development, coupled with strong cost controls and supply chain improvement boosted growth.

HUL’s strong research and development capabilities ensured product superiority and strong distribution, with market development driving penetration and digital capabilities aiding strong positioning in premium products and alternate channels.

HUL seems well ahead of competition (both traditional and new-age players) on multiple fronts, and is set to fortify its leadership in the fast moving consumer goods space over the next five-10 years, supported by favorable macros in the sector.

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