Price hikes to drive HUL Q4 revenue, ad-spends to dent margin: Analysts

According to brokerages, a sequential expansion in Ebitda margins is expected, amid tapering commodity cost inflation

HUL Q4FY23 preview: Strong volume growth, along with price hikes are likely to help FMCG giant Hindustan Unilever (HUL) clock revenue growth up to 14.5 per cent year-on-year (YoY) to Rs 15,409 crore in the January-March quarter of FY23 (Q4FY23), forecast analysts. The company will declare results on Thursday, April 27.

According to brokerages, a sequential expansion in Ebitda (earnings before interest, tax, depreciation, and amortisation) margins is expected, amid tapering commodity cost inflation. However, on a YoY basis, Ebitda margins are likely to contract up to 39 basis points (bps) to 23.7 per cent in Q4FY23, due to higher advertising spends.
 

 

Besides, analysts said that the company's adjusted profit-after-tax (PAT) will grow up to 14.8 per cent YoY to Rs 2,605 crore in Q4FY23, but moderate sequentially due to lower margins.
 

Ahead of Q4FY23 results, shares of HUL were flat at Rs 2,502 per share in Wednesday's intra-day trade, as against 0.1 per cent rise in the S&P BSE Sensex.

Factors to watch out: Demand patterns in rural versus urban markets, discretionary consumption, out-of-home demand, competitive intensity, and raw material price trends.
 

Here's what top brokerages estimate for HUL in Q4FY23:
 

Axis Securities

The brokerage firm expects the FMCG major to clock 14.5 per cent YoY revenue growth, driven by a 5 per cent surge in volumes, and price hikes. However, higher advertising spends, and royalty impact is likely to dent Ebitda margins nearly 40 bps YoY to 23.7 per cent in Q4FY23. PAT, they said, is expected to rise 14.2 per cent YoY to Rs 2,607 crore in the March quarter.
 

Motilal Oswal

While analysts foresee Ebitda margins to shrink on a YoY basis to 23.9 per cent in Q4FY23, it is likely to expand sequentially from 23.2 per cent in Q3FY23, on the back of lower palm oil costs. Besides, they anticipate domestic volume growth of 5 per cent YoY in the March quarter. The brokerage firm shared a 'buy' stance on the counter, with Rs 3,100 apiece as target price.
 

Prabhudas Lilladher

Analysts expect Hindustan Unilever to stage recovery in profitability, led by peaked out input costs, and expected pick-up in rural demand. Margins, they said, are likely to improve QoQ in Q4FY23 as raw material prices of crude have reduced sequentially, coupled with price hikes, and low priced raw material inventory. The brokerage firm foresees 13.4 per cent sales and 19.9 per cent PAT CAGR over FY22-25.
 

Sharekhan

Though softening of palm oil price would benefit gross margin expansion on a YoY basis for Q4FY23, higher advertisement, and other expenses would lead to marginal contraction in operating profit margins. Analysts expect home-care, personal-care, and food or refreshment categories to drive revenues 13 per cent YoY to Rs 15,812 crore in Q4FY23.