PL First Cut - HUL 1Q24 - Volumes grow 3% (PLe 5%); GM improves 120bps QoQ to 49.9%

PL First Cut – HUL 1Q24 – Amnish Aggarwal – Head of Research, Prabhudas Lilladher Pvt Ltd

HUL 1Q24 – Volumes grow 3% (PLe 5%); GM improves 120bps QoQ to 49.9%

(CMP: Rs2700|Accumulate)

> Revenues grew by 6.1% YoY to Rs151.5bn (PLe: Rs155.6bn).

> Gross margins expanded by 256bps YoY/120bps QoQ to 49.9% (PLe:50.0%).

> EBITDA grew by 8.4% YoY to Rs35.2bn (PLe: Rs36.9bn).

> A&P Expenses grew by 11.5% YoY to Rs14.8bn

> Adj PAT grew by 9.2% YoY to Rs25bn (PLe: Rs26.7bn).

> Home Care revenues grew by 10% YoY; EBIT grew by 14% YoY; while margins expanded by 64bps YoY to 18.3%.

> Personal Care revenues grew by 4.4% YoY; EBIT grew by 4.3% YoY; while margins contracted by 2bps YoY to 26.3%.

> Food & Refreshment revenues grew by 4.7% YoY; EBIT grew by 17.8% YoY; while margins expanded by 200bps YoY to 17.9%.

> Others revenues declined by 7.1% YoY; EBIT declined by 7% YoY; while margins expanded by 7bps YoY to 36.9%.

Business Performance:

> Home Care: Double digit revenue growth for the division with mid-single digit volume growth. Fabric Wash & Household Care grew in double digits led by market development actions and premiumization.

> Beauty & Personal Care: Mid-single digit revenue & volume growth for the division. Skin Care and Colour Cosmetics grew double-digits, led by strong performance in premium portfolio. Hair Care delivered mid-single digit volume growth.

> Foods & Refreshment: Mid-single digit revenue with flat volumes for the division. Tea saw modest volume growth as consumers downgraded due to higher inflation in premium teas. Foods grew in mid-single digit led by strong performance in Ketchup and Food Solutions. Ice Cream grew in mid-single digit on a high base.

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Volumes were a miss on our/street estimates. However, rural markets have seen volume growth (on low base). The quarter saw sequential margin improvement with inflation moderating across most commodities (ex-tea & coffee) which was reinvested in A&P to help drive demand. Pricing element has reduced to 3% and future growth will likely be volume-led. As this will be the first earnings call for new MD – Rohit Jawa, we look forward to hearing about the strategy ahead for the company. We have an Accumulate rating on the stock with a TP of Rs2825.

Stock trades at 50.6x FY25 EPS