HUL Q2 Review - Low Growth To Persist Near-Term; Margins To Remain In-Check; Maintain 'Hold': Systematix

Systematix Research Report

Hindustan Unilever Ltd. delivered Q2 FY25 results slightly below our expectations, with volume growth of 3% YoY and nearly flat pricing, as management called out an urban growth slowdown not fully offset by a rural recovery. Growth was impacted by-

1. volume declines in soaps and tea (nearly 1/4th of overall sales) as the company saw consumers downtrading,

2. muted consumption in nutrition and mass skin products and

3. low growth in foods.

However, better performances in detergents and dishwash (~37% of the portfolio, saw high-single digit volume growth supported by pricing normalizing), hair care, skin care and cosmetics (~20% of the portfolio, saw mid-single digit volume growth) and good growth in oral care limited the growth slowdown. Positively, management-

1. called out a sequential increase in soaps’ sales in Q3,

2. has intervened in nutrition drinks with launch of Rs 10 packs in Horlicks and Boost, and

3. expects tea downtrading to ease gradually.

However, while it expects an overall stable demand trend near-term, it indicated no growth acceleration over H2 FY25.

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