HUL Q2 preview: Revenue may rise up to 19% YoY on GSK Consumer acquisition

Hindustan Unilever (HUL), the fast-moving consumer goods (FMCG) bellwether, is slated to announce its September quarter results (Q2FY21) on Tuesday, October 20. In the FMCG sector, analysts expect a strong recovery in both essentials and discretionary categories. However, products focused on premium price and out-of-home consumption will continue to face growth headwinds, they say.

Further, intermittent and extended lockdowns in the top 100 cities could result in slower recovery in urban markets while a strong monsoon could lift rural sales as they are being less affected by the Covid-19 pandemic. Additionally, benign raw material prices could lead to the Ebit margin expansion of most FMCG companies; however, in the case of HUL, high palm oil and tea prices may keep some pressure on margins, analysts note.

That said, let's take a look at what brokerages expect from HUL's September quarter numbers.

Emkay Global

The brokerage estimates HUL's organic sales to grow 5 per cent year-on-year (YoY) whereas, including GlaxoSmithKline Consumer Healthcare (GSK) sales, revenue is expected to grow 19 per cent YoY at Rs 11,713.3 crore. On a sequential basis, revenue will rise by 10.9 per cent. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) is seen at Rs 2,962.8 crore, up 21.3 per cent YoY and 12.1 per cent QoQ. Ebitda margin is expected to grow 50 bps YoY and 26 bps QoQ to 25.3 per cent. "Gross margin contraction to narrow QoQ due to price hikes but high palm oil and tea prices to keep some pressure on margins," the brokerage said in a result preview note.  Profit after tax (PAT) or net profit is estimated to increase 16.4 per cent YoY and 13.9 per cent QoQ to Rs 2,133.3 crore. Home and Personal Care segments' revenue are expected to grow by 8 per cent, and 3 per cent, respectively while Refreshments to grow by 75% (5% excluding GSK).

IDBI Capital

The brokerage expects revenue to grow by 8 per cent YoY to Rs 10,617.4 crore led by a 52 per cent increase in revenue from the food portfolio (due to merger of GSK’s food portfolio). On a QoQ basis, revenue will rise by 5 per cent. Further, it expects Home Care business to reach pre-covid level while revenue from Beauty and Personal care to decline 5 per cent YoY (vs 12 per cent decline in 1QFY21. "Overall, we expect underlying volume to decline by 2.6 per cent YoY in 2QFY21 while the balance growth (to come from price/mix change)," it said.

EBITDA will increase by 8.7 per cent YoY and 0.4 per cent QoQ to Rs 2,654.4 crore while EBITDA margin is expected to rise 20 bps YoY to 25 per cent due to lower ad-spends and stock-keeping unit (SKU) rationalisation. Net profit is seen at Rs 1,915.7 crore, up 1.8 per cent QoQ and 3.7 per cent YoY.

Recovery in rural business, pricing actions, and new launches will be the key monitorables.

Centrum Broking

Centrum Broking estimates 12.4 per cent YoY revenue growth at Rs 11,074.9 crore, taking into consideration the acquisition of GSK consumer with effect from April 1, 2020 (Hence, Q2FY21E are not comparable YOY and QoQ). On a QoQ basis, revenue will rise by 22.9 per cent. Organic business is expected to see a decline of 2.2 per cent.

EBITDA is expected to grow 15.4 per cent YoY and 36.5 per cent QoQ to Rs 2,819.7 crore while on the margin front, operational efficiencies from GSK merger and strict cost control to deliver 66bps YoY EBITDA margin expansion at 25.5 per cent. Adjusted net profit is seen at Rs 2,106.8 crore, up 11.2 per cent YoY and 33.6 per cent QoQ.

During the quarter under review, shares of HUL have slipped 5 per cent as compared to a 9 per cent rise in the S&P BSE Sensex, exchange data show.