HUL Q1 Results Review - Inline Show; Earnings To Further Improve In H2: Motilal Oswal

Motilal Oswal Report

Hindustan Unilever Ltd.’s Q1 FY25 performance was in line with our estimates. Net sales rose 2% YoY, with 4% volume growth (estimate: 3%). Demand trends saw steady improvements with a gradual rural recovery.

The focus remains on volume-led growth through consistent new launches and aggressive spending on marketing.

Home Care segment maintained high-single-digit volume growth with 4% revenue growth. Fabric Wash remained the key growth driver. Beauty and Wellbeing segment clocked mid-single digit volume growth with 3% revenue growth. Hair Care portfolio reported double-digit volume growth.

Personal Care posted low-single digit volume growth with a 5% decline in revenue. Pricing actions in Skin Cleansing hurt growth. Food and Refreshment posted flat volume with 1% revenue growth. A severe summer affected the beverage portfolio. Nutrition drinks a saw weak performance.

Gross margin expanded by 150 basis points YoY to 52% (in line), out of which 100 bp was reinvested in advertising and promotion (up 12% YoY). Ebitda margin was flat YoY at 23.8% (in line). Ebitda margin is expected to improve moderately in the medium term. We model ~24-25% margin for FY25 and FY26.

We model volume growth acceleration in FY25, driven by own initiatives and improvement in demand trends. Revenue growth is expected to improve to high-single digits in H2 FY25, driven by growth in volume and prices. With an improving earnings trajectory, we continue to expect valuation re-rating.

We reiterate Buy rating with a target price of Rs 3,250 (60 times on Jun’26E earnings per share, close to five-year average P/E).

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