ICICI Securities: HUL Prioritising Volume Growth Over Gross Margins Is A Significant Trajectory Shift
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ICICI Securities Report
A potential change in stance at Hindustan Unilever Ltd. in favour of volume growth, in our opinion, could be a key driver for HUL stock’s outperformance in 2021.
We note that this strategy has already started playing out in tea (price hike lower than the competition and commodity inflation), soaps (price hikes lower than competition despite steep input inflation (palm prices up over 30% in six months) and detergents.
In India, a ‘growth market’, investors tend to rightly ignore short-term profit sacrifice, provided the trajectory of volume outperformance is clear (as it’s discounted cash flow-accretive).
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