HUL Q2 Review - Strong Fundamentals, Yet Margins Under Pressure: Centrum Broking
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Centrum Broking Report
Hindustan Unilever Ltd.’s Q2 FY22 results are in line with our estimates – revenue/Ebitda/adjusted profit after tax grew 11.2%/9.2%/9.2% YoY.
The domestic business saw 11% growth, backed by subdued 4% volume growth.
Health, hygiene and nutrition (85%) grew 7%, while discretionary (12%) grew 31%. The out-of-home business (3%) grew 74% on improved consumer mobility.
Gross margin contracted 142 basis points to 51.6% due to elevated costs in top-three commodities – palm oil (palm fatty acid distillate), crude oil, and high density polyethylene (packaging).
Despite higher price increases and with lower rise in employee cost, ad-spend and other expenditure, HUL's Ebitda growth was controlled at 9.2%, while Ebitda margin shrank 46 basis point to 24.6%.
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