ICICI Direct: HUL Leveraging Emerging Trends In Q1

ICICI Direct Report

Hindustan Unilever Ltd. Q1 reported 4.4% revenue growth with the inclusion of acquired brands (Horlicks, Boost) revenue. On a like to like basis, revenue fell 7% with 8% volume dip. Despite manufacturing and supply chain disruption in April, May, the home care segment saw mere 2.1% decline in revenues. The company has been able to refill the distributor pipeline by June 2020 to pre-Covid-19 levels. Beauty and personal care segment (BPC) segment saw 12.0% sales decline severely impacted by cosmetics, skin care and deodorants. However, soaps, sanitisers saw a strong surge in demand. The company has augmented hand wash capacity by 5 times to meet the surge in demand aided by increasing hygiene awareness.

Foods and refreshments category grew 52% with the inclusion of acquired brands sales. On a like to like basis, revenues fell 4% with ice-cream business severely impacted by lockdown. However, ketchup, tea and coffee witnessed strong double digit growth with increasing in-home consumption. Operating margins contracted 113 basis points with 220 basis points shrinkage in gross margins. The reduction in advertising and promotion (A&P) spend by 393 basis points partially offset the operating de-leverage impact on other costs. Net profit increased 7.2%.

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