HUL Q1 preview: Company may see firm sales growth, but input cost inflation likely to dent margins

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MUMBAI: Hindustan Unilever is likely to report double-digit growth in net sales aided by high single-digit growth in volume and prices for the quarter ended June. The country’s largest consumer staples company will also benefit from a weak base in the year-ago quarter.

Hindustan Unilever is expected to report a near 15 per cent year-on-year growth in its net sales to Rs 12,105 crore, according to an average of estimates from 11 brokerages polled by ETMarkets.com. The company’s bottomline is expected to swell by 9.5 per cent on-year to Rs 2,060.5 crore.

The soap-to-shampoo maker will announce its June quarter earnings on Thursday.

Analysts expect the company to report a volume growth of 5-9.5 per cent in the June quarter despite a weak base in the year-ago quarter largely because of some destocking in the portfolio of GSK Consumer Healthcare’s products.

Analysts suggested that the company did not receive any one-time benefit from panic buying by consumers in the quarter despite a devastating second wave of Covid-19 infections. This is largely because of imposition of localized lockdowns by states instead of a national lockdown like the one imposed in the year-ago quarter.

Brokerage firm Edelweiss Securities said that may report a 6 per cent growth in pricing due to hikes taken in segments like soaps, tea and laundry.

Despite the price hikes undertaken by the company, its operating margins are expected to suffer in the quarter. HUL is likely to report earnings before interest, tax, depreciation and amortization of Rs 2,926 crore for the reported quarter.

Analysts expect the company’s EBITDA margins to shrink by 2-130 basis points largely on account of continued rise in soft commodity prices across the world during the quarter.

Besides the earnings for the first quarter, analysts will be keen to understand the outlook for demand after the recent re-opening of the economy in June. Further, the focus will be on the company’s outlook for rural demand, which was adversely affected by the second wave of Covid-19.

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