Hindustan Unilever Ltd (HUL), the FMCG major, is expected to see muted earnings growth during the third quarter of FY24 as weak festive demand and price cuts are likely to weigh on volume and revenue growth of the company.

is set to release its Q3 results on Friday, January 19. The company is likely to report a marginal rise of 2.2% in its net profit for Q3FY24 at 2,638 crore as compared to 2,581 crore in the corresponding quarter of last fiscal, as per average estimates of 5 brokerage houses. HUL’s revenue during the quarter ended December 2023 is estimated to remain flat year-on-year (YoY) at 15,400 crore. The company is expected to deliver muted volume growth of around 1%-2%. “We model flat YoY revenue growth in view of demand trends largely tracking 2Q; no material pick-up in the festive demand, resulting in 2% YoY growth in UVG. HUL’s price reductions are expected to impact topline growth,” Kotak Institutional Equities said. The home-care category growth is expected to moderate to 0.5% YoY due to price cuts in the laundry portfolio. The beauty and personal care (BPC) segment growth is also likely to moderate to 0.8% YoY owing to price cuts in soaps. At the operating level, HUL’s earnings before interest, tax depreciation and amortisation (EBITDA) is expected to rise 1.3% to 3,581 crore from 3,537 crore, YoY. EBITDA margin is likely to expand by 77 basis points (bps) to 24.0% from 23.2% YoY on the back of lower palm oil costs and other input costs. “EBITDA margins expansion will be moderate owing to higher ad spends, offsetting gross margins expansion of 523 bps YoY. PAT growth will be inline with EBITDA growth,” Axis Securities said. Analysts believe HUL Q3 results may have the impact of the end of marketing agreement with GSK from November 1, 2023. During the December quarter, the prices of essential raw materials for FMCG companies have declined. Palm oil prices corrected by 7.9% YoY and 4.1% QoQ with prices expected to rise post Q3FY24 as El Nino could reduce production. Palm Fatty Acid (PFAD) prices are flat YoY but down 6.6% QoQ, said brokerage firm Prabhudas Lilladher. The fall in input cost prices has led to resurgence of local regional firms, offering good quality products and gaining market share. While incremental price cuts are small, companies are increasing advertising and offering extra incentives to channels to remain competitive with regional brands. Going ahead, HUL’s outlook on competition from local and regional players and rural versus urban demand will be key monitorables. At 2:30 pm, HUL shares were trading 0.53% lower at 2,550.15 apiece on the . Hindustan Unilever Livemint tops charts as the fastest growing news website in the world to know more.

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