PL First Cut - HUL 2Q24

PL First Cut – HUL 2Q24 – Amnish Aggarwal – Head of Research, Prabhudas Lilladher Pvt Ltd

HUL 2Q24 – Volumes grow 2% (PLe 3%); GM improves 282bps QoQ to 52.7%

(CMP: Rs2552|Hold)

> Revenues grew by 3.6% YoY to Rs152.8bn (PLe: Rs155.6bn).

> Gross margins expanded by 692bps YoY/282bps QoQ to 52.7% (PLe:50.2%).

> EBITDA grew by 9.4% YoY to Rs36.9bn (PLe: Rs35.9bn).

> A&P Expenses grew by 65.2% YoY to Rs17.2bn

> Adj PAT grew by 1.2% YoY to Rs26.7bn (PLe: Rs25.6bn).

> Home Care revenues grew by 3.3% YoY; EBIT grew by 11.9% YoY; while margins expanded by 145bps YoY to 18.7%.

> Personal Care revenues grew by 4.5% YoY; EBIT grew by 13.3% YoY; while margins expanded by 211bps YoY to 27.2%.

> Food & Refreshment revenues grew by 2.6% YoY; EBIT declined by 3.2% YoY; while margins contracted by 112bps YoY to 18.7%.

> Others revenues grew by 4.1% YoY; EBIT grew by 29% YoY; while margins expanded by 819bps YoY to 42.4%.

> Board declares an interim dividend of Rs18/share.

Business Performance:

> Home Care: Low single digit revenue growth for the division with mid-single digit volume growth as premium portfolio outperforms. Further price reductions were taken in both Fabric Wash and Household Care.

> Beauty & Personal Care: Mid-single digit revenue & volume growth for the division. Skin Cleansing had low-single digit volume growth while Skin Care & Colour Cosmetics grew double-digit driven by focused interventions in new demand spaces and channels of the future. Hair Care delivered high-single digit growth and Oral Care grew mid-single digit led by Closeup.

> Foods & Refreshment: Mid-single digit revenue growth for the division. Tea delivered modest growth as consumers continue to downgrade. Coffee grew in double-digits. HFD delivered mid-single digit price led growth, broad-based across the portfolio. Foods and Ice Cream both grew in mid-single digit on a high base. Foods Solutions, Mayonnaise and Peanut Butter continue to clock strong growths.

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Volumes were a mild miss on our estimates & recovery will continue to be gradual in nature. However, rural markets have seen mid-single volume growth (on low base). 3Q24 will likely see tailwinds from festive season, sustained buoyancy of services and govt’s thrust on capex. Any further inflation in commodity basket may arrest the gross/EBITDA margin recovery witnessed by the company. Pricing element has further reduced to 1.6% (vs 3% in 1Q) and future growth will now likely be volume-led. We have a Hold rating on the stock

Stock trades at 50.2x FY25 EPS