HUL announces Q1 results

Last updated: 21 Jul, 2020 | 05:03 pm

HUL announces Q1 results
  • Profit beats Estimates: HUL’s net profit rose 7.2% on-year to 1,881 crore in Q1FY21, beating street expectations. Analysts had earlier estimated a profit of about ₹1,700 crore. Revenue rose 4.4% on-year to Rs 10,560 crore—higher than the estimated 9,880 crore.
  • Numbers aided by GSK CH India merger: Domestic consumer growth (excluding the effect of the merger) declined by 7% in the quarter. Synergies arising from the GSK merger helped to sustain EBITDA margins at a healthy 25% level. The company completed the merger in April getting brands like Horlicks and Boost under its belt. The Foods and Refreshment segment saw revenue growth of 52% YOY, however, this was primarily aided by the GSK merger as the segment saw a decline of 4% excluding the merger effect. The demand for cosmetics and beauty products was muted resulting in negative growth rates.
  • Product Portfolio: 'In times of COVID-19, 80% revenue contribution has come from hygiene, health & nutrition products for HUL. Out of home services like water, ice-cream, food solutions, and vending have taken a severe hit contributing just 5% to the revenue, while discretionary items like skincare, cosmetics, and deos contributed 15%.' {{tweet1}}
  • Dividend: For FY21, the Board has approved an interim (special) dividend of Rs.9.50 per share.
  • Management remains confident about long term growth: HUL said that though the near term demand outlook is uncertain, the company remains in a good position, and the long term structural opportunity of FMCG in India remains intact.

The current quarter saw a steady set of numbers from the FMCG giant thanks to the boost given by the GSK merger. Ramping up capacities in the health and hygiene space whose demand is expected to remain firm in the near future, will aid growth in the near-term. Products like Lifebuoy delivered double-digit growth across formats. Discretionary products and out of home products might continue to face some pressure, however, they do not form a major portion of the revenue. A strong balance sheet and a diverse portfolio with market leadership in many segments gives HUL an advantage.

Our VGQM model has a HOLD rating on the stock.

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