Mumbai: When consumer staples giant, Hindustan Unilever Ltd (HUL) announced its March quarter results on 3 May, its volume growth had dropped to a six-quarter low. Another quarter down the line, investors will keep a close eye on the volume growth. It’s worth noting that expectations are running low with the Street looking at a further moderation in volume growth.
“We expect HUL's volume growth to moderate further to about 5-6% from 7% last quarter," said analysts from Credit Suisse Securities (India) Pvt. Ltd in a report on 3 July. Kotak Institutional Equities estimates HUL’s underlying volume growth at 6% for the June quarter.
Interestingly, Dabur India Ltd’s volume growth showed a remarkable improved to 9.6% for the June quarter. In the March quarter, the same parameter for Dabur was at a subdued 4%. Needless to say, as far as HUL goes, any beat on the volume front will cheer investors.
As always, management commentary on demand conditions remain of primary importance, especially the rural consumption outlook. While announcing the March quarter results, HUL had said, rural demand, which outran demand growth of urban areas, was slowing to grow at a similar pace as urban regions.
Further, according to Credit Suisse, the soaps category is likely to be the drag for HUL, while home care is still likely to lead growth. In general, analysts are expecting earnings before interest, tax, depreciation and amortisation (Ebitda) margin to expand about 50-100 basis points on a year-on-year basis. One basis points is one-hundredth of a percentage point.
A Bloomberg poll of analysts has pegged HUL’s June quarter revenues at about ₹10,171 crore and net profit at ₹1,716 crore. This represents about 9% and 12% improvement in revenues and net profit, respectively, on a year-on-year basis.
So far this calendar year, the HUL stock has declined by 7.5%. Despite that, the shares trade at a pricey 51 times estimated earnings for financial year 2020.