HUL Q1 Results Review - Encouraging Volume Growth Performance: Dolat Capital

Dolat Capital Report

Hindustan Unilever Ltd.’s core results came in-line with our estimates. Despite 4% volume growth, revenue growth was moderate due to price pass-on. Going ahead, price deflation would reduce significantly but volume growth will continue to lead value growth in the near term.

Gross margin expanded 150 basis points YoY due to softening commodity prices. However, 90/70 bps increase in advertising and promotion/other expense restricted the Ebitda margin expansion at 30 bps (as estimated).

We maintain our FY25/26E EPS estimates at Rs 46.9/52.6. However, 4% volume growth (versus 2% estimate) was a positive surprise. Hence, we increase valuations to 58 times (long term-average) versus 48 times earlier to factor in-

1. improved rural growth,

2. increased government spending and

3. stable Ebitda margins.

Maintain ‘Accumulate’ rating with target price of Rs 3,050.

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