Earnings Preview: HUL Q3FY23 PAT growth estimated at 11% YoY down from 17% in Q3FY22 on 100 bps margin fall

A 100-bps decline in operating margins will likely weigh on Hindustan Unilever’s (HUL) December quarter profits when the company announces its quarterly earnings on Thursday. According to Zee Business’ research report, HUL is expected to report an OPM of 24 per cent for the reporting quarter versus 25 per cent in Q3FY22. 

Margin pressure amid high input costs could ebb quantum of growth in the company’s net profit in Q3FY23 which is seen to advance by 11 per cent year-on-year. In comparison, HUL reported a nearly 17 per cent YoY jump in its net profit in December 2021 quarter over December 2020 quarter. 

As per the research report expect net profit at Rs 2,495 crore in Q3FY23 versus Rs 2,243 crore in Q3FY22. In Q3FY2021, the FMCG major reported Profit After Tax (PAT) of Rs 1,921 crore. 

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PAT refers to the earnings after the income taxes are accounted for. It is the company's ability to generate returns.    

Meanwhile, revenues may surge by 15 per cent to Rs 15,000 crore in the October-December 2022 quarter as compared to Rs 13,092 crore in the year-ago period. 

HUL’s Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) is expected to grow by 8 per cent YoY to Rs 3,531 crore as compared to Rs 3,279 crore in the same quarter of FY22. 

Growth in sales volume is expected to come around 4 per cent in Q3FY23 led by a recovery in the detergents and dish wash segment amid. Lower palm oil prices have resulted in improved margins in these segments. 

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Similarly, the beauty and personal care segment may see a recovery in volumes during the third quarter of FY23. 

Price hikes and sequential decline in raw material will drive gross margins of HUL on a quarter-on-quarter (QoQ) basis, brokerage firm Axis Securities in its preview report said.  

EBITDA margins may decline by 140 bps owing to higher ad-spends and inflationary pressure on a YoY basis, it added. 

“We estimate 5 per cent volume growth and 7 per cent pricing growth during the quarter. Home care is expected to witness 23 per cent sales growth given the price hikes taken by the company in the last one year,” ICICI Securities said in its preview report on HUL. 

Management commentary on rural demand, margins recovery pay, and advertising and promotional spends will be key monitorables. 

The end of 2022 brought in some relief as the rate of inflation came down to a year-low of 5.72 per cent in December, shows the data released by The Ministry Of Statistics And Programme Implementation on Thursday. HYPERLINK - https://www.zeebiz.com/economy-infra/news-cpi-inflation-rate-falls-again... 

HUL shares today ended at Rs 2,684, up by Rs 16.45 or 0.6 per cent from the Tuesday closing price.