Motilal Oswal: HUL’s Scale Benefits And GSK Drive Margin Beat In Challenging Quarter
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Motilal Oswal Report
Hindustan Unilever’s net sales grew 4.4% YoY to Rs 105.6 billion in Q1 FY21 (estimate Rs 100.1 billion). Ebitda edged down 0.1% YoY to Rs 26.4 billion (estimate 10.3% decline to Rs 23.7 billion), and profit before tax de-grew 1.1% YoY to Rs 25.3 billion (estimate Rs 23.2 billion).
On the other hand profit after tax was up 7% YoY to Rs 18.7 billion (est.: Rs 17.2 billion). Gross margins stood at 51.8% (220 basis points contraction YoY), while Ebitda margins contracted by 110 basis points YoY to 25%.
HUL’s reported 5% beat on sales and approximately 10% beat on Ebitda and PAT versus our estimates. The outlook is gradually improving, with the discretionary part of the portfolio (15% of sales) gradually seeing recovery.
In a period of relative normalcy, HUL (as has been the case in recent years) is likely to report superior earnings growth, which has led us to maintain a Buy rating.
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