HUL Q1 Results Disappoint: PAT Dips 3% to Rs 2,673 Crore, Cost Pressure Looms

HUL shares have been under pressure in recent years, with the stock falling by over 12% over the past five years. Despite its cheaper valuation, the company’s margins are facing cost pressure, which may limit the upside potential of the stock.

HUL’s Q1 Results Disappoint, PAT Dips 3% to Rs 2,673 Crore

The company’s profit after tax (PAT) dipped 3% to Rs 2,673 crore in the June quarter, driven by a one-time credit. This has led to a decline in the stock’s price, with shares sliding over 6%.

HUL’s year-on-year revenue growth of 10% in the June quarter was led by the home care business, which delivered 14% underlying sales growth (USG), the highest in three years.

Home Care Business Drives Growth

The home care business delivered double-digit growth across fabric wash and household care, with the Beauty & Wellbeing segment remaining HUL’s most profitable segment, delivering a margin of 28%.

The segment delivered 12% USG, the highest in at least 10 quarters, with growth being broad-based across hair care, skin care, and digital-first brands such as Minimalist.

Market Impact: Cost Pressure and Margin Expansion

• The operating margin (EBIT margin) contracted to 17% from 20% a year ago, due to cost pressure.
• The Foods division continued to deliver steady growth, driven by coffee and nutrition, though its share in HUL’s overall business fell to at least 10 quarter low of 20.3%.
• The segment margin expanded to 20% from 16% a year ago, driven by premiumisation.

Key Takeaways

• HUL’s margins are facing cost pressure, which may limit the upside potential of the stock.
• The home care business drove growth in the June quarter, with the Beauty & Wellbeing segment remaining the most profitable segment.
• The Foods division delivered steady growth, driven by coffee and nutrition, though its share in HUL’s overall business fell.

FAQs

What is the impact of cost pressure on HUL’s margins?

The operating margin (EBIT margin) contracted to 17% from 20% a year ago, due to cost pressure.

How has the home care business performed in the June quarter?

The home care business delivered 14% underlying sales growth (USG), the highest in three years, with double-digit growth across fabric wash and household care.

What is the outlook for HUL’s performance in the current fiscal year?

HUL expects broader category participation, stronger rural demand, premiumisation, and rapid expansion of quick commerce to support its performance in the current fiscal year.

Conclusion

HUL’s margins are facing cost pressure, which may limit the upside potential of the stock despite its cheaper valuation. While the home care business drove growth in the June quarter, the company’s performance in the current fiscal year will depend on various factors, including broader category participation, stronger rural demand, premiumisation, and rapid expansion of quick commerce. Investors should closely monitor the company’s performance and adjust their investment strategies accordingly.