Hindustan Unilever's (HUL) numbers for the Q1FY20 were broadly in-line with estimates. The company reported revenue growth of 6.6% yoy to Rs10,114cr driven by a 5% underlying volume growth (estimated 6% volume growth). Gross margin for the quarter remained flat led by lower advertisement cost and other expenses. EBITDA grew by 17.6% yoy to Rs2,647cr, in-line with estimates. The EBITDA margin expanded 244bps yoy to 26.2%. Thus, the company reported PAT growth of 14.8% yoy to Rs1,755cr.
The company has reported 7% yoy domestic consumer growth, led by 5% yoy underlying volume growth. Home care and foods & refreshments posted good growth, whereas personal care was subdued mainly on account of mass-end soaps.
The home care segment reported 10.1% yoy growth to Rs3,465cr with 129bps yoy expansion in the EBIT margin to 20.2%. In detergents, Rin was re-launched nationally, while Sunlight liquid detergent was launched in select geographies.
In household care (Vim, Domex), growth was led by central and southern markets. In purifiers, the focus is on the premium range, with a new ‘go to’ market strategy in place
The beauty and skin care segment (earlier personal care) saw 4.1% yoy revenue growth to Rs4,589cr with 227bps yoy expansion in EBIT margin to 29.6%. Soaps continued to witness softness in the mass end – Lux and Lifebuoy. New launches include natural variants under Lux Botanicals, Pears Naturale range, Sunsilk variants, Fair & Lovely soap, Elle 18 lasting glow compact, among others.
The food and refreshment segment reported 9.2% yoy revenue growth to Rs1,950cr with EBIT margin expansion of 106bps yoy to 19.4%. Beverages clocked a reasonable quarter, and ice cream and frozen desserts witnessed a good season. New launches include Lipton Matcha green tea in the e-commerce channel.
The advertisement spend was down 67bps yoy as a percentage of net sales to 11.5%, mainly due to lower competitive pressures, optimisation of ad-spends and phasing of activities and innovations in home care.
Interest cost for the quarter stood at Rs24cr against Rs7cr in Q1FY19.
Other income for the quarter grew by 8.9% yoy to Rs147cr.
Tax rate for the quarter stood at 31.6%, against 29.5% in the same quarter last year.
Moderation in volume growth for HUL has been broad based across geographies. However, aggregate growth for the company continues to be ahead of the industry.
Modern trade contributes 15-17% to HUL’s sales, whereas contribution from e-commerce is now at 2-3%. Contribution from the rural channel stands at 30-35%.
Management stated that a broad based recovery is unlikely before 2HFY20. The drivers of recovery are likely to be a good monsoon and fiscal measures taken by the government such as actions on infusing liquidity, spending on infrastructure and health, and direct benefit transfers, among others.
Hindustan Unilever Ltd is currently trading at Rs. 1,693.20, up by 14.45 points or 0.86% from its previous closing of Rs. 1,678.75 on the BSE.
The scrip opened at Rs. 1,680 and has touched a high and low of Rs. 1,701.70 and Rs. 1,667.95 respectively. So far 16,30,831 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 50 DMA.
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