HUL Q1 Results Review - Harsh Summer, Price Cuts Lifts The Quarters' Volumes: Centrum

Centrum Broking Report

Hindustan Unilever Ltd.’s Q1 FY25 print was in-line with our estimates; revenue/Ebitda/adjusted profit after tax grew 1.3%/ 2.4%/3.1%, led by negative pricing and 4.0% volume growth.

Given high food inflation impacting mass consumption, management cited it saw some green shoots and recovery in rural markets. With drop in prices for top-4 commodities – CPO, caustic soda, crude oil, and soda ash, gross margin inched up to 51.4% (+154 bp).

Despite higher ad-spends +11% (+200 bp), and other expenses +6.9%, with lower employee costs by 7.5%, Ebitda grew 1.4%, settling Ebitda margin at 23.5% (+26bp) YoY.

To maintain price-value equation, HUL took pricing actions in mass detergents, soaps and BPC portfolio, yet expects gross margins to improve given premium mix and operating leverage despite increase in media spends.

We remain cautiously optimistic expecting low-single digit volume growth as near term operating environment continue to be competitive. Considering management commentary on price increases in H2 FY25 we have tweaked earnings and retain Reduce rating, with a revised DCF-based target price of Rs 2,636 (implying 49.2 FY26E EPS).

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