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Published: January 23, 2024
Updated: January 23, 2024

HUL Faces Setback: Shares Hit 2-Month Low After Q3 Earnings Miss

Hindustan Unilever (HUL), India's leading FMCG company, experienced a significant setback as its shares plunged to a two-month low following disappointing Q3FY24 earnings. The company attributed the underwhelming performance to weak rural consumer sentiment and delayed winter.

Earnings Report Impact:

In intra-day trade, HUL shares fell by 3%, reaching Rs 2,485 on the BSE after reporting consolidated net profit growth of only 1.4% at Rs 2,509 crore compared to the previous year quarter. The revenue showed a marginal decline of 0.3% YoY, standing at Rs 15,294 crore, with a modest 2% YoY growth in volume.

Operational Insights:

HUL's EBITDA margins exhibited a marginal improvement of 10 bps, reaching 23.7% from 23.6% in Q3FY23. The company highlighted weak rural consumer sentiment and delayed winter as key factors behind its lacklustre performance.

Stock Performance and Historical Low:

The stock's current value marks its lowest level since November 17, 2023, and it had previously touched a 52-week low of Rs 2,393 on March 15, 2023.

Outlook and Recovery Expectations:

HUL anticipates a gradual demand recovery, emphasising that rural income growth and winter crop yields will play crucial roles. The company remains cautious about the operating environment, with benign commodity prices and expected high competitive intensity. Despite challenges, HUL remains focused on driving competitive volume growth.

Strategic Measures:

To navigate the challenging landscape, HUL is increasing investments in its brands and long-term strategic priorities. The company aims to maintain EBITDA margins within a healthy range while acknowledging the potential for marginally negative price growth if commodity prices remain stable.

HUL's recent performance underscores the challenges in the FMCG sector, impacted by external factors. As the company strategizes for the future, its commitment to driving volume growth and managing margins reflects a proactive approach to navigate uncertainties in the market. Investors and industry observers will closely watch how HUL adapts to the evolving landscape and executes its long-term strategic plans.