HUL Q2 preview: Eyes on flat sales growth, muted earnings, a new CEO's plans ahead

HUL, India's largest fast moving consumer goods company, is to announce its financial results for the July-September quarter on Thursday. It is the first quarter under new CEO Priya Nair.

The GST cuts benefitted 40% of HUL portfolio spanning soaps and shampoos prompting it to pass on the benefits to consumers through high single-digit to low double-digit price cuts.

But primary sales to distributors and retailers got impacted as they paused new orders to clear inventory and await new stocks with revised, lower prices. Consumers also delayed purchases in anticipation of lower prices.

Brokerage JM Financial estimated that sales in the first two months of the quarter gone by were in line with the momentum in the April-June quarter when the maker of Lux soaps and Knorr soups grew sales volumes 3% after three quarters of slowing growth. Standalone net profit rose 8% to Rs2,732 crore on a 4% sales jump to Rs15,747 crore.

“Our channel checks suggest underlying demand trends in July and August were largely similar to that in 1QFY26. With GST transition-led impact in September, HUL expects near flat to low-single-digit consolidated sales growth in 2QFY26," JM Financial analyst Mehul Desai said in a note dated 26 September.

The impact, however, is one-off with recovery predicted starting November, the analyst added.

A Bloomberg poll of 15 analysts has pegged HUL's consolidated revenue at Rs16,024 crore and a profit after tax of Rs2568.6 crore. While a poll of 21 analysts have pegged HUL's standalone revenue to come in at Rs15,938 crore while 18 analysts expect a profit of Rs2511.5 crore.

GST transition

HUL, which reported a turnover of Rs60,680 crore last fiscal, has rolled out price cuts of up to 15% across several popular product categories as part of its rationalisation exercise in response to GST cuts which kicked in 22 September.

Rate cuts benefited HUL across its portfolio. GST rates changed to 5% from 18% for soaps, shampoos, toothpaste, among a swathe of consumer products. But, the company flagged supply chain disruptions after the rate cuts.

Noting the accretive impact of the cuts on long-term consumption, the company had said in a statement to stock exchanges on 26 September: “We have seen a transitory impact in the form of disruption at distributors and retailers across channels to clear existing inventories with old prices. This has resulted in postponement of ordering in anticipation of receiving new stocks with updated prices and lower orders across the overall portfolio as consumers delayed their pantry buying."

Some of this will continue into October, it continued. "This has led to a short-term impact on sales for the company in September. Given our existing pipeline inventory in the channels, we expect this impact to continue into October as well."

Among key products, Dove Hair Oil Rescue shampoo (340 ml) has seen its price reduced from Rs490 to Rs435, an 11.2% cut, while Clinic Plus Strong & Long shampoo (355 ml) is down 13.5% to Rs340.

In the soaps category, Lifebuoy (75 g × 4 pack) and Lux Radiant Glow (75 g × 4 pack) have become cheaper by around 11–12%, retailing at Rs60 and Rs85 respectively. In the foods and beverages portfolio, Horlicks Chocolate (200 g) is now priced at Rs110 instead of Rs130, a 15.4% cut, and Bru Coffee (75 g) is down 10% to Rs270, analysts at JM Financial noted.

Eyes on new leadership

HUL’s management commentary on Thursday will offer more details on how the GST transition has impacted its portfolio and whether the price changes aided consumer demand since.

The quarter is also the first under the leadership of Priya Nair who was appointed as chief executive officer and managing director of the company effective 1 August following the departure of predecessor Rohit Jawa.

All eyes will be on Nair's commentary on demand trends and how the new chief has handled the fairly complicated transition to GST.

Nuvama Institutional Equities analyst Abneesh Roy wrote in a research note: “HUL is already showing aggression and speed under the new MD as the company was among the first to come out with ads relaying new prices under the revised GST regime."

Yes Securities, meanwhile, said lower input prices were offset by higher sales promotions and this would show up in profitablity metrics in the September quarter

“The benefit of major raw material commodities like palm oil duty cut and lower tea prices will be offset by elevated trade promotions, thus gross margin is expected to remain flat on a sequential basis at 50% (-160bps year-on-year). EBITDA margins should contract by 190bps on a year-on-year basis to 22%. EBITDA and recurring PAT are likely to decline by 6.4% and 8% year-on-year respectively," analyst Vishal Punmiya said in a 5 October note on the consumer goods sector.

Meanwhile, Nuvama expects HUL to report a 1% year-on-year increase in consolidated revenue, compared to a 5.2% rise in Q1FY26 and 2.4% in Q2FY25. Underlying consolidated volumes are likely to remain flat year-on-year, versus 4% growth in the June quarter of the current fiscal and 3% in March quarter of the last fiscal. Consolidated EBITDA is projected to decline 5% year-on-year, following a 1.4% dip in Q1FY26 and a flat performance in Q2FY25.

On the input cost front, palm oil prices continue to show volatility, while tea prices have moderated slightly amid early-season deflationary trends.

In the June quarter the company had lowered tea prices in response to competition and lower input costs as well as on its home care portfolio. As a result, price-led growth during the quarter is expected to record low single-digit underlying growth (1%); it, however, raised prices in skincare due to higher palm derivative costs, Nuvama analyst Roy said in a research note.