HUL Q4FY22 Results Preview: FMCG major may report muted numbers due to higher input costs

Amid higher input costs, fast-moving consumer goods (FMCG) major Hindustan Unilever Limited (HUL) is likely to report muted earnings in the fourth quarter of the financial year 2021-22 (Q4FY22) on Wednesday, several brokerages estimate in their March quarter earnings preview.

Both volume growth and margins are likely to fall, Zee Business Senior Research Analyst Varun Dubey says in his report. He added, “The volumes are expected to see a degrowth on the back of higher base last year and margins would fall on the back of higher raw material costs.”

The impact of the price hike taken by HUL across all segments is likely to be visible in Q4 revenues, however, supply chain issues and unable to pass on complete input costs would impact the overall Q4 results of the company, the research analyst added.  

According to Axis Securities, HUL may report over 4 per cent year-on-year growth in profit to Rs 2,188 crore, and revenue may jump by almost 5 per cent to Rs 12,508 crore in Q4FY22.

Reported revenues to grow 5% owing to weak consumer demand and rural slowdown. EBITDA (earnings before interest, taxes, depreciation, and amortization) Margin to remain flat on account of gross margin contraction expand ~100bps/60bps YoY/QoQ (quarter-on-quarter) respectively aided by price hikes, grammage cuts even as GMs contract,” Axis Securities said in its expectations

Little lower expectations than Axis Securities, another brokerage IIFL Securities see HUL’s profit growing marginally by around 1.5 per cent YoY to Rs 2206 crore, while revenue seen rising by 8 per cent YoY to Rs 16,729.9 crore in Q4FY22.

Most input commodities are up sequentially and expect aggregate gross margin/EBITDA margin (except ITC) to contract by 123bps/47bps YoY, respectively, IIFL Securities said in a report.

Meanwhile, YES Securities see the profit of HUL declining by 1.4 per cent YoY to Rs 2099 crore and revenue gaining marginally by 3 per cent YoY to Rs 12496 crore in Q4FY22. The brokerage expects muted revenue growth owing to negative volume growth, and margins to remain stable QoQ.

ICICI Direct Research expects HUL to witness 8.7 per cent revenue growth led by price hikes taken in the last year. The company has taken price hikes to pass on steep commodity inflation in the last six months. We estimate around 5 per cent volume decline during the quarter given rural regions are witnessing dismal demand conditions with demand shifting towards economy brands, it said.

The elevated levels of palm oil & increasing crude-based raw material costs are expected to result in gross margins contraction of 227 bps in Q4, according to the brokerage.

“We expect 9 per cent lower advertisement spends, which is likely to partially offset the contraction in gross margins. We expect a 65-basis points contraction in operating margins. Net profit is likely to witness a de-growth of 4.7 per cent,” ICICI Direct Research also said in its preview report.