HUL Q1 Results Review - Inline; Price Run-Up Leads To Rating Downgrade: Yes Securities

Yes Securities Report

Hindustan Unilever Ltd.'s Q1 FY24 operating performance was in-line with our estimate. Underlying Volume Growth came in slightly better at 4% (2-year CAGR at ~3.5%) versus our estimate of 2.5%. Miss on Food and Refreshments segment was offset by better growth in Home Care which saw strong UVG.

Skin cleansing is seeing early green shoots in bars indicating positive results from recent actions (pricing, innovation, promotion). HUL's Management believes it has gained market share in its key segments of mass detergent, tea and skin care.

While we expect UVG to improve through the course of the fiscal, flattish pricing (negative pricing in H1 offset by low single digit pricing in H2) and no major improvement in Ebitda margins from current levels of 23-24% (even while raw material remains benign) does not build into strong earnings growth for FY25.

We roll-forward our target price to Sep’26E EPS, giving us a revised target price of Rs 2,845. Recent run-up makes us downgrade our rating a notch to Neutral.

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