HUL FY20 Q4: Strong growth in profit likely but volumes may be under pressure
HUL may post a net profit of ₹1,796.30 crore for January-March, while revenue is seen at ₹10,116.50 croreGlaxoSmithKline Plc plans to soon begin selling its stake in HUL, estimated to be worth almost ₹29,850 crore
MUMBAI: Fast-moving consumer goods giant Hindustan Unilever Ltd (HUL) is likely to report a strong rise in its net profit for the fourth quarter of fiscal 2020 even as volume growth may be be under pressure, analysts said.
According to the average of estimates of 17 brokerages polled by Bloomberg, the company may post a net profit of ₹1,796.30 crore for January-March, while revenue is seen at ₹10,116.50 crore.
In early deals on Thursday, shares of HUL traded flat at ₹2238.85 on the BSE. The company is scheduled to announce its earnings later today.
Analysts at Edelweiss Securities expect HUL's revenue to grow at 2.6%, Ebitda at 12.5% and net profit at 16.3% year on year (y-o-y). Volume growth is expected at 4% y-o-y. HUL would be a key beneficiary of rural demand recovery and herbal push and see a decent volume growth to sustain its market leadership and strong distribution network. “With the push-for-premium sustaining, we expect better earnings growth for years to come," it said in a report.
Centrum Broking Ltd expects HUL to be resilient in the current economic scenario and deliver mid-to-high single digit volume growth over next two years. “Moreover, we note that our current estimates for FY21 & FY22 are ex- Glaxo Smithkline (GSK)," it said.
Earlier this month, parent Unilever Plc withdrew its 2020 guidance, citing the unknown severity and duration of the COVID-19 pandemic. The management thinks the April-June quarter will be tough for emerging markets but July-December should see a strong recovery. Unilever has also changed its monthly operational forecasting cycle to a weekly basis in order to respond to rapid changes in consumer demand.
On Wednesday, the HUL stock had declined 2.5% to close at a near one-month low of ₹2,232.10 after reports said GlaxoSmithKline Plc (GSK) plans to soon begin selling its stake in the Indian company, estimated to be worth almost ₹29,850 crore ($3.9 billion). GSK received the shares earlier this month in return for the sale of its Indian consumer business to HUL.
The two multinational giants had announced the all-share deal worth ₹31,700 crore ($3.8 billion) in December 2018. Bloomberg first reported on Wednesday that GSK was in discussions with its advisers on when to launch the transaction.
In a statement on 1 April, Glaxo said HUL has paid it an extra ₹3,045 crore (approximately $400 million) crore to acquire the Horlicks brand for India, after seeking board approval, exercising the option available in the original agreement made between Unilever and GSK.
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