The FMCG bellwether is forecast to post 19 per cent growth in revenue to Rs 11,550 crore in the fiscal third quarter. Margin is expected to remain flat at 25.2 per cent as a cumulative result of higher raw material cost and lower proportion of other expenses. The company is reporting the results on Wednesday.
HUL’s discretionary portfolio is going to show a revival in sales. The early onset of winter should augur well for its personal care products.
The nutrition portfolio that HUL has acquired is likely to report a better traction compared to its other product segments. Thanks to the pandemic, the health and hygiene theme remained active during the quarter.
Spending on ads as a proportion of sales is likely to have increased sequentially. Increase in raw material prices is likely to weigh on the gross margin — although savings on travel and marketing expenses as well as the cost control measures are going to assuage that impact.
While rural demand ruled strong, urban demand also picked up — with a clear uptick in out-of-home consumption. Ecommerce continued to be the faster growing segment in the urban market.
Investors need to watch out for the management commentary on the pricing action taken to mitigate the input cost inflation, outlook on consumer demand and competitive actions of brands like Sebamed.
The HUL stock has risen 8 per cent in the past six months and has not been able to breach its record high of Rs 2,614 hit in April 2020. It is trading at a premium valuation of 80 times the company’s earnings for the trailing four quarters. Proposals to be announced in the Union Budget could be the next major driver for the stock.