Packages of Hindustan Unilever Ltd. Surf excel laundry detergent are displayed for sale at a store in Mumbai. (Photographer: Kuni Takahashi/Bloomberg)

HUL Volume Growth To Moderate In Fourth Quarter, Say Brokerages

Hindustan Unilever Ltd’s.volume growth is expected to drop below 10 percent for the first time in six quarters, according to brokerages.

Citing interactions with the management, brokerages, including Bank of America Merrill Lynch and Deutsche Bank, expect volume growth—which has averaged around 11 percent in the last five quarters—to range between 6 percent and 7.5 percent year-on-year in the three months ended March.

CLSA, following the interaction with the management, said the moderation in industry demand growth is visible in rural as well as urban segments. The rural segment has grown at 1.3 times that of urban in the current fiscal so far, the brokerage said. Attributing the slowdown to weak macro environment, CLSA said the effects of measures in the interim budget to boost consumption will take time to show up.

Bank of America Merrill Lynch expects the ratio of rural to urban growth to fall to 1.2 in the fourth quarter. While CLSA and Deutsche Bank said that competitive intensity has stabilised, Deutsche Bank said the impact of additional marketing spends, such as promotions carried out during the Kumbh Mela, was little.

  • CLSA said the management sees input price environment as benign even as in the earlier quarter the company had expressed concerns about volatility in input costs.
  • Deutsche Bank expects modest expansion in HUL’s operating margin.
  • BofaML said it doesn’t rule out further gains in the company’s share price once the merger of the Indian consumer businesses of HUL and GlaxoSmithKline Plc is complete.

(Corrects an earlier version that attributed growth forecasts to the company)