HUL Q1 Results Review - Improving Fundamentals, Even Better Narratives May Drive Re-Rating: ICICI Securities

ICICI Securities Report

Hindustan Unilever Ltd. reported an improvement in underlying volume growth trajectory (at 4% YoY) driven by a recovery in rural markets (outperformed urban after a year) and mass brands portfolio (except mass skin care) which is likely to sustain driven by an improving demand scenario.

Further, management has taken corrective actions for improving the proposition of mass skin care. Key positives:

1. Homecare saw an improvement in UVG led by mass fabric wash brands, and

2. hair care saw broad-based double-digit volume growth in beauty and wellbeing, while skin cleansing also saw an improvement led by pricing actions.

Food and refreshment segment had a weak quarter due to harsh summers impacting hot beverages. Retention of majority of corporate market share gains (~200 basis points) over inflation and deflation cycle is impressive (unlike previous cycles).

Margins are likely to remain stable in the near term due to higher ad-spends. Upgrade to Add (from Hold) with a revised target price of Rs 2,950.

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