HUL results: All major segments posted double-digit revenue growth

Parvatha Vardhini C BL Research Bureau | Updated on July 16, 2018

After recording only a 5 per cent growth in domestic consumer sales in the June 2017 quarter due to the GST transition, Hindustan Unilever regained form, with sales growing in double digits in each of the quarters beginning July-September 2017.

The first quarter of this fiscal is no different.

In the three months ended June 2018, domestic consumer sales grew by 16 per cent y-o-y to ₹9,356 crore, backed by an underlying volume growth of 12 per cent.

Growth in the latest quarter has been broad-based, with all major segments – home care, beauty & personal care, and foods & refreshments showing double-digit increase in revenues.

In major segments such as home care and beauty & personal care which together bring in 80 per cent of the revenues, products such as Vim, Dove, Pears, Fair & lovely, Indulekha and Lakme colour cosmetics showed strong performance.

Performance in the foods and refreshment category was aided by the seasonally strong quarter for ice-cream and frozen desserts.

During the quarter, the company relaunched Domex liquid in South India and also extended the offering of Domex powder to new geographies.

Besides, it also launched its ‘Naturale’ make up and skin care products and Lever Ayush breakfast range.

Margin expansion

During the quarter, the company witnessed some cost pressures from rise in prices of various inputs.

Raw material cost as a percentage of sales came in at 45.8 per cent against 44. 3 per cent recorded a year ago.

The company also stepped up its advertising spends. At 12.3 per cent of sales in the latest quarter, advertising and promotion expenses increased by about 240 basis points over the June 2017 quarter. Yet, cost control efforts helped in margin expansion.

Operating margin came in at 23.7 per cent, about a percentage point higher than a year ago. Profits grew 19 per cent y-o-y to ₹1,529 crore.

Improving performance of Hindustan Unilever after the GST blip has seen the stock gain about 30 per cent so far in 2018. In fact, the stock touched its 52-week high of ₹1,772 in the run-up to the results announcement.

It now trades at a valuation (price to earnings) of 69 times its trailing 12-month earnings, in comparison with its three-year historical average PE of 49 times.

Going forward, a further uptick in rural consumption and expansion of its naturals portfolio, be it foods or in the beauty and personal care segments, will help the company.

Continued volatility in the markets could also prompt investors to prefer FMCG stocks which are defensive and withstand downsides better.

Published on July 16, 2018

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