HUL Share Price Live Updates: HUL Volume Performance
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Economic Times
6 hours ago
- Economic Times
FMCG margin recovery likely in Q2 and Q3; Britannia, HUL, Nestlé among top picks: Abneesh Roy
"Coming to your specific question on EBITDA margins—my sense is that for most companies, the worst is behind us. HUL, for example, has proactively reduced its margin as a strategic choice, aiming for growth, which has led to a slightly lower margin profile. However, from an outlook perspective, costs of coffee and tea are correcting, which should help their margins. Even in Q1, some commodities like detergent inputs were under control. Now PFAD, which is used in soaps, is also expected to correct, given that palm oil prices have come down," says Abneesh Roy, ED, Nuvama Institutional Equities. ADVERTISEMENT Do you expect margin expansion to be a consistent trend in Q2 and Q3 across the sector? Which companies are best positioned to lead this recovery, especially considering commodity cost deflation and evolving consumption patterns? Abneesh Roy: Yes, in most of the FMCG company results, we've seen that either India volume growth has exceeded expectations or met them. So clearly, in Q1, the early signs of an urban slowdown have now paused, and a gradual urban recovery is starting to emerge. Even in ITC's cigarette business, for example, cigarette volume growth has accelerated. On a two-year basis in Q1, it showed over 9% volume growth compared to about 7% in Q4. For HUL—being the sector's behemoth—volume growth was 4% versus 2% in the previous quarter. We're seeing a gradual recovery across most categories and companies in Q2 and beyond, except in summer-related categories. For instance, both Varun Beverages and Emami saw year-on-year volume declines in summer categories—Varun was down 7%. Even in Q2, despite a favourable base, the high monsoon impact on Varun Beverages will need to be monitored. Coming to your specific question on EBITDA margins—my sense is that for most companies, the worst is behind us. HUL, for example, has proactively reduced its margin as a strategic choice, aiming for growth, which has led to a slightly lower margin profile. However, from an outlook perspective, costs of coffee and tea are correcting, which should help their margins. Even in Q1, some commodities like detergent inputs were under control. Now PFAD, which is used in soaps, is also expected to correct, given that palm oil prices have come again, in HUL's case, there has been a conscious reduction in EBITDA margin—around 100 bps—to support growth. On the other hand, for companies like ITC, we expect margin improvement in Q2 and Q3. In Q1, ITC faced three challenges: higher tobacco costs (which have now corrected), a larger contribution from the education and stationery business where Chinese imports had an impact, and subdued FMCG margins. However, in Q2 and Q3, the share of the stationery business will decline seasonally, and cost deflation—especially in palm oil—will support margin expansion in the FMCG Nestlé faced high coffee costs in Q1, but coffee prices have since corrected by 30%. Tea companies also have a favourable outlook due to a good crop. Overall, for most companies, Q1 was the margin bottom—except for HUL, where it was a deliberate strategy. But frankly, I don't see much reason to worry about HUL. We remain positive—it should see improving volumes and overall sales. Even the parent company, Unilever, has made strong, positive comments regarding HUL. ADVERTISEMENT What about urban recovery? Managements have noted that green shoots are visible. Do you think this will translate into a more sustained recovery, and is the worst of the weak urban demand now behind us? Abneesh Roy: Yes, that's a good question. Urban consumption in FMCG, QSR, apparel, durables, and other consumption segments has been sluggish. But my sense is that we will see gradual green shoots in FMCG. Rural will still grow faster than urban in the next three quarters. However, from negative volume growth in urban FMCG over the past three to four quarters, we're now moving toward gradual growth across most categories and companies. ADVERTISEMENT Food inflation is under control, overall inflation is moderate, there have been interest rate cuts, and the government has offered higher tax rebates—all of which help FMCG demand. But in other discretionary consumption areas, challenges remain. For instance, the IT sector is witnessing job cuts—TCS let go of 12,000 people—and overall IT hiring is weak, which will impact retail and discretionary in urban FMCG, the issue was primarily at the lower end of the income pyramid. There, softer food inflation and rate cuts have helped. The retail and QSR challenges, by contrast, will likely affect the mid-to-top-end of consumption. Still, for FMCG, urban green shoots are emerging. Even in paints, we are positive—Asian Paints, for instance, is expected to benefit. ADVERTISEMENT What's your view on pricing power across FMCG going forward? Do companies still have room to raise prices, or is that cycle behind us, given the competition and subdued demand? Abneesh Roy: In fact, we take the opposite view. There are three important things here. Historically, FMCG companies have taken 2–3% price hikes annually. But currently, there's no need. Most raw material costs are coming down—coffee is down 30%, the tea crop looks good, and prices of palm oil and crude are under control. Nearly every key FMCG raw material is stable. With a good monsoon, agri-inputs and dairy costs should also remain benign. So, I don't see any reason for the usual 2–3% price hike, since there's no cost I said, the worst is behind us in urban markets, and a gradual recovery is on the cards—so macros are supportive. In terms of competition, India's FMCG sector has always been competitive. But even there, we think the worst is behind us, particularly with D2C brands. Many of them are focusing on profitability now. Larger listed companies like HUL, ITC, and Marico have acquired strong D2C brands—Minimalist, OZiva, etc. The remaining smaller, unlisted D2C players are shifting focus toward profit as well. ADVERTISEMENT So, D2C players won't disappear, but we expect less aggressive pricing and less disruption. Even Q-commerce and e-commerce platforms—if you look at category leaders—they now have strong partnerships with large FMCG companies. Quick commerce is also consolidating, reducing the number of dark stores. This is good news for large FMCG players. While staples and core FMCG seem to be recovering, what's your take on big-box retail? After a mixed set of results from DMart, what can we expect from Trent this week? Abneesh Roy: The outlook for Trent was already shared at the AGM, so to an extent, the Q1 sales numbers are priced in. There are two issues here. First, the base has been high over the past few years, so some catch-up is happening. Second, apparel, QSR, and retail are still being impacted by weak IT job growth and lower salary hikes—this segment is important for apparel and retail consumption. Third, there was a timing shift—some festivals impacted Q4 this year, not Q1. VMart mentioned this, and other companies have echoed it. As for Avenue Supermarts (DMart), their entry into Uttar Pradesh is a big positive. Historically, they've opened 40–50 stores per year, but now, with UP in the mix, store addition should accelerate. Over the next 3–5 years, DMart's expansion will likely get a strong boost. Their CEO Neville has highlighted this as a key strategic focus. While competition from quick commerce remains, the store expansion story is intact and will be a tailwind. UP is India's largest state, and entry into Agra is a strong signal of things to come. Lastly, help us understand your pecking order in the FMCG and consumption space. Which stocks do you prefer for the next 6–12 months? Abneesh Roy: We are more positive on FMCG and paints. In FMCG, we like Britannia—results are expected this week, and we expect strong numbers in FY26 in terms of volume, sales, and margins. We also like Hindustan Unilever—we've seen strong commentary from both the company and its parent. Nestlé is another pick; coffee costs are down 30%, so from next quarter, we should see margin recovery. In paints, we like Asian Paints—competition has stabilised and urban demand is picking up slightly. We also like Bikaji. Overall, FMCG should do well. We're also seeing investor rotation from sectors facing headwinds, like IT, into FMCG. Demand and margin outlooks both look favourable in FY26.
Time of India
6 hours ago
- Time of India
FMCG margin recovery likely in Q2 and Q3; Britannia, HUL, Nestlé among top picks: Abneesh Roy
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel "Coming to your specific question on EBITDA margins—my sense is that for most companies , the worst is behind us. HUL, for example, has proactively reduced its margin as a strategic choice, aiming for growth, which has led to a slightly lower margin profile. However, from an outlook perspective, costs of coffee and tea are correcting, which should help their margins. Even in Q1, some commodities like detergent inputs were under control. Now PFAD, which is used in soaps, is also expected to correct, given that palm oil prices have come down," says Abneesh Roy, ED, Nuvama Institutional in most of the FMCG company results, we've seen that either India volume growth has exceeded expectations or met them. So clearly, in Q1, the early signs of an urban slowdown have now paused, and a gradual urban recovery is starting to emerge. Even in ITC's cigarette business , for example, cigarette volume growth has accelerated. On a two-year basis in Q1, it showed over 9% volume growth compared to about 7% in HUL—being the sector's behemoth—volume growth was 4% versus 2% in the previous quarter. We're seeing a gradual recovery across most categories and companies in Q2 and beyond, except in summer-related categories. For instance, both Varun Beverages and Emami saw year-on-year volume declines in summer categories—Varun was down 7%. Even in Q2, despite a favourable base, the high monsoon impact on Varun Beverages will need to be to your specific question on EBITDA margins—my sense is that for most companies, the worst is behind us. HUL, for example, has proactively reduced its margin as a strategic choice, aiming for growth, which has led to a slightly lower margin profile. However, from an outlook perspective, costs of coffee and tea are correcting, which should help their margins. Even in Q1, some commodities like detergent inputs were under control. Now PFAD, which is used in soaps, is also expected to correct, given that palm oil prices have come again, in HUL's case, there has been a conscious reduction in EBITDA margin—around 100 bps—to support growth. On the other hand, for companies like ITC, we expect margin improvement in Q2 and Q3. In Q1, ITC faced three challenges: higher tobacco costs (which have now corrected), a larger contribution from the education and stationery business where Chinese imports had an impact, and subdued FMCG margins. However, in Q2 and Q3, the share of the stationery business will decline seasonally, and cost deflation—especially in palm oil—will support margin expansion in the FMCG Nestlé faced high coffee costs in Q1, but coffee prices have since corrected by 30%. Tea companies also have a favourable outlook due to a good crop. Overall, for most companies, Q1 was the margin bottom—except for HUL, where it was a deliberate strategy. But frankly, I don't see much reason to worry about HUL. We remain positive—it should see improving volumes and overall sales. Even the parent company, Unilever, has made strong, positive comments regarding that's a good question. Urban consumption in FMCG, QSR, apparel, durables, and other consumption segments has been sluggish. But my sense is that we will see gradual green shoots in FMCG. Rural will still grow faster than urban in the next three quarters. However, from negative volume growth in urban FMCG over the past three to four quarters, we're now moving toward gradual growth across most categories and inflation is under control, overall inflation is moderate, there have been interest rate cuts, and the government has offered higher tax rebates—all of which help FMCG demand. But in other discretionary consumption areas, challenges remain. For instance, the IT sector is witnessing job cuts—TCS let go of 12,000 people—and overall IT hiring is weak, which will impact retail and discretionary in urban FMCG, the issue was primarily at the lower end of the income pyramid. There, softer food inflation and rate cuts have helped. The retail and QSR challenges, by contrast, will likely affect the mid-to-top-end of consumption. Still, for FMCG, urban green shoots are emerging. Even in paints, we are positive—Asian Paints, for instance, is expected to fact, we take the opposite view. There are three important things here. Historically, FMCG companies have taken 2–3% price hikes annually. But currently, there's no need. Most raw material costs are coming down—coffee is down 30%, the tea crop looks good, and prices of palm oil and crude are under control. Nearly every key FMCG raw material is stable. With a good monsoon, agri-inputs and dairy costs should also remain benign. So, I don't see any reason for the usual 2–3% price hike, since there's no cost I said, the worst is behind us in urban markets, and a gradual recovery is on the cards—so macros are supportive. In terms of competition, India's FMCG sector has always been competitive. But even there, we think the worst is behind us, particularly with D2C brands. Many of them are focusing on profitability now. Larger listed companies like HUL, ITC, and Marico have acquired strong D2C brands—Minimalist, OZiva, etc. The remaining smaller, unlisted D2C players are shifting focus toward profit as D2C players won't disappear, but we expect less aggressive pricing and less disruption. Even Q-commerce and e-commerce platforms—if you look at category leaders—they now have strong partnerships with large FMCG companies. Quick commerce is also consolidating, reducing the number of dark stores. This is good news for large FMCG outlook for Trent was already shared at the AGM, so to an extent, the Q1 sales numbers are priced in. There are two issues here. First, the base has been high over the past few years, so some catch-up is happening. Second, apparel, QSR, and retail are still being impacted by weak IT job growth and lower salary hikes—this segment is important for apparel and retail there was a timing shift—some festivals impacted Q4 this year, not Q1. VMart mentioned this, and other companies have echoed it. As for Avenue Supermarts (DMart), their entry into Uttar Pradesh is a big positive. Historically, they've opened 40–50 stores per year, but now, with UP in the mix, store addition should accelerate. Over the next 3–5 years, DMart's expansion will likely get a strong boost. Their CEO Neville has highlighted this as a key strategic focus. While competition from quick commerce remains, the store expansion story is intact and will be a tailwind. UP is India's largest state, and entry into Agra is a strong signal of things to are more positive on FMCG and paints. In FMCG, we like Britannia—results are expected this week, and we expect strong numbers in FY26 in terms of volume, sales, and margins. We also like Hindustan Unilever—we've seen strong commentary from both the company and its parent. Nestlé is another pick; coffee costs are down 30%, so from next quarter, we should see margin paints, we like Asian Paints—competition has stabilised and urban demand is picking up slightly. We also like Bikaji. Overall, FMCG should do well. We're also seeing investor rotation from sectors facing headwinds, like IT, into FMCG. Demand and margin outlooks both look favourable in FY26.
Time of India
6 hours ago
- Time of India
HUL's new CEO Priya Nair has to invigorate a sluggish consumer giant
Hindustan Unilever Ltd .'s new Chief Executive Officer Priya Nair is inheriting India's largest consumer goods maker that has seen stuttering growth in the last few years. While the Indian unit of Unilever Plc posted a forecast-beating quarterly profit last week, Nair, who took over the CEO role on Aug. 1, has her task cut out in sustaining this momentum. The company's stock has inched up about 4% in the last three years while the benchmark NSE Nifty 50 index surged almost 42%. Its volume growth has been sluggish. Sales expansion has been a fraction of the 2022 levels while disruptor local brands are eating into its market share across product categories. Often seen as the bellwether of the consumer sentiment in the world's most-populous nation, Hindustan Unilever, or HUL , also was dragged down by a consumption slowdown in India over the past year. So strong was investor disappointment that the sudden announcement about Rohit Jawa stepping down as the CEO half-way through his term to make way for Nair stoked a stock rally on July 11. The first woman CEO for HUL was earlier serving as the president for the beauty unit and the Global Chief Marketing Officer at the London-based parent. Nair has led the Indian unit's home care, beauty and wellbeing businesses in the past. Nuvama Wealth Management called Nair 'a more aggressive leader' in a note soon after her appointment was announced. Nair's 'focus remains on delivering volume-led competitive growth that is profitable and sustainable,' a representative for Unilever's India unit said in an email. The company will 'share more details at an appropriate time.' Not Kept Pace Hindustan Unilever 'has had a problem for multiple years,' said Arvind Singhal, founder at retail consultancy Technopak Advisors. 'India has been changing rapidly and they haven't been able to keep pace with India's changes.' The seller of Bru coffee and Dove soaps was battling a consumer demand slowdown in the past few quarters as picky city buyers chose to spend less or switched to artisanal products. Hindustan Unilever gets about two-thirds of its sales from urban India, while rural areas contribute the rest. 'The firm will have to have a fresh distribution strategy and rejig margin structure,' Singhal said. It will also need to 'develop new products,' and figure out the categories which can be rebuilt, he said. Sales growth in the recent past has been tepid too, dragged down by global price volatility in raw materials like palm oil and coffee, though the June quarter saw the return of revenue expansion. Nair will also be in the global spotlight. Unilever's new CEO Fernando Fernandez told analysts last week after its quarterly earnings that it would be investing a 'disproportionate' amount in the US and India, adding that 'momentum is building in India.' India is Unilever's second-largest market by revenue after the US and the largest by volume. Fernandez praised Nair's 'deep understanding of our home and personal care business in India that she successfully ran for many years.' She also has the international markets knowledge to keep the company's portfolio in turn with consumer needs, he said. HUL's beauty and personal care segments — they contribute over a third of HUL's sales — have been hit by rising competition from local startups like Honasa Consumer Ltd., with its Mamaearth brand, and global rivals like L'Oreal SA pushing hard into India. Jawa, Nair's predecessor, tried to double down on premiumization through the firm's 'ASPIRE' strategy by upgrading its legacy brands, adding new brands and spending on digital push. In January, HUL acquired skincare upstart Minimalist for 26.7 billion rupees ($305 million), in one of the biggest local deals for a cosmetics startup. Ratings Upgrade At least three brokerages including Goldman Sachs upgraded their ratings outlook on HUL on Friday and at least 17 analysts, including Jefferies and Citi, raised their price target for the stock, signaling that Nair has the wind at her back. 'We look forward to an update on the strategy' as the new CEO takes over, Jefferies analysts including Vivek Maheshwari wrote in a note Friday.
