HUL Q2 preview: Volume growth likely to be in line

The country's largest consumer goods company Hindustan Unilever (HUL) will report its second-quarter numbers on October 26. And all eyes will be on the key volume growth metric that the company will report that day.
 

Consensus estimates are HUL will report volume growth in the 2-4 per cent bracket, in line with what it has registered in the last two quarters. This is expected to be a clear sign that the company is not out of the woods as far as the market slowdown is concerned.

A fortnight ago, HUL's parent Unilever had indicated that market conditions had softened in India and that the second-quarter results would mirror that possibility.

“Volume (growth) in skin cleansing (in India) has suffered from price increases. Indian markets remain subdued and under pressure,” Andrew Stephen, investor relations head, Unilever, said.

Closer home, Edelweiss Securities in a recent note said that HUL's revenue (or net sales) growth in the second quarter would be Rs 7,921 crore, up 2.5 per cent year-on-year. But sequentially, this would be down 2.5 per cent, it indicated. Profit after tax (or net profit), Edelweiss said would be in the region of Rs 1015 crore, up 2.1 per cent year-on-year, but sequentially down 10 per cent.

Reliance Securities in a note also maintained a similar line, saying that HUL's net sales for the September quarter would be up 3.1 per cent year-on-year touching Rs 7831 crore, while net profit would be up 5.5 per cent year on year touching Rs 1036 crore for the quarter.

“There is a realisation now that returning to the double-digit growth of a few years ago may not be possible,” G Chokkalingam, founder, Equinomics Research & Advisory had said earlier. “India has and remains a key market for Unilever. But the dynamics here have changed for good," he said. 

Apart from small regional players, HUL has had to contend with the growing clout of home-grown consumer goods companies, among them Patanjali. 

“The number of players it has to deal with now is far more than a decade ago. Existing players have grown in size. Access or availability of products has also grown and price points have fallen in categories like personal care,” said Daljeet Singh Kohli, head of research at brokerage IndiaNivesh.

While commodity prices are inching up, companies have been cautious in raising prices, analysts said.  HUL while raising prices in personal care and laundry is expected to tread cautiously on this front, analysts said, lest it impact volume growth.