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Hindustan Unilever Ltd

| September Quarter 2025 Earnings call

NEUTRAL SENTIMENT

Report Source

⬤23rd Oct 25

Summary : HUL delivered competitive Q3 performance amidst GST transition and monsoon impacts, focusing on volume-led growth, premiumization, and strategic channel development for future acceleration.

Management Perspective positive : Priya Nair stated, 'Our focus, obsession is going to be on volume-led revenue growth.' Ritesh Tiwari added, 'We do expect to see volume growth to be better in second half of the financial year compared to first half.'

Concall Report Analysis & Insights

Business Overview

  1. HUL delivered 2% Underlying Sales Growth in Q3 2025, primarily price-led.
  2. EBITDA margin was 23.2%, down 90 basis points year-on-year due to increased A&P spends.
  3. PAT before exceptional items declined 4%, while reported PAT grew 4% due to a one-off tax benefit.
  4. GST rate reforms benefited 40% of the portfolio, moving to the 5% slab.
  5. Short-term sales were impacted by GST transition and prolonged monsoon conditions.

Future Growth Prospects

  1. Focus on radical consumer segmentation for Power Spenders, Premiumizers, and Democratizers.
  2. Elevating brand desirability by modernizing core brands and scaling premium portfolio.
  3. Accelerating future-proofing capabilities in d-commerce, q-commerce, and social-first demand generation.
  4. Reshaping portfolio by disproportionately investing in high-growth demand spaces.
  5. Ice Cream business demerger expected to improve EBITDA margin by 50-60 bps.

Management Insights

  1. Management is committed to driving volume-led profitable growth with sharp focus and agility.
  2. GST reforms are a welcome move, expected to boost disposable income and consumer sentiment long-term.
  3. The company passed on the entire GST rate reduction benefit to consumers across 1,200 SKUs.
  4. Stepped up investments in brands and business, increasing A&P spends by 80 bps year-on-year.
  5. Expects second half of FY26 growth to be better than the first half, with improved volume growth.

Signs of Skepticism

  1. Management expects GST benefits to manifest gradually, not as an immediate acceleration.
  2. The impact of populist programs on FMCG consumption is considered transitory, not structural.
  3. Quantifying the exact impact of GST transition on volume growth was an approximation (up to 2%).
  4. The timeline for trade pipeline normalization (4-6 weeks) requires significant effort.

Risk Factors

  1. Prolonged and intense monsoon conditions disrupted supply chains and dampened demand.
  2. Short-term GST changes led to transitory disruptions in trade channels and delayed consumer purchases.
  3. Commodity trends remained divergent, with inflationary pressures in Palm Oil and SMP.
  4. Potential impact of a shorter or less severe winter season on sales.

Good To Know

  1. Interim dividend of Rs 19 per share declared, totaling Rs 4,464 crores.
  2. Ritesh Tiwari is transitioning to Global Head of M&A, Treasury, and Ventures at Unilever.
  3. Niranjan Gupta has been welcomed back as CFO Designate.
  4. Minimalist brand delivered strong double-digit growth for the period.
  5. More than 50% of investment happens digitally, with focus on competitive CAC to LTV ratio.

Key Drivers

  1. GST reforms boost disposable income.
  2. Monetary easing improves macro conditions.
  3. Innovation pipeline supports growth.
  4. E-commerce channels drive sales.

Key Analyst Discussions

Competitive Environment

  1. Questions on HUL's competitive performance and market share gains in various categories.
  2. Comparison of HUL's GST impact with other FMCG companies like Nestle.
  3. Discussion on strengthening market leadership in Hair Care despite GST impact.

Market Trends & Consumer Behavior

  1. Impact of GST stimulus and state government populist programs on FMCG consumption.
  2. Assessment of rural versus urban demand trends and their contribution to growth.
  3. Concerns about the evolving impact of weather patterns, including prolonged monsoon and winter.

Financial Highlights

  1. Clarification on margin guidance of 22-23% and the 50-60 bps improvement from Ice Cream demerger.
  2. Inquiry about one-off impacts on other operating income and employee costs.
  3. Discussion on the net impact of price changes and A&P investments on EBITDA margin.

Product Composition

  1. Focus on premiumization in Home Care, Skin Cleansing, and Beverages.
  2. Performance of specific brands like Glow & Lovely Glass Bright and OZiva.
  3. Strategy for developing markets in categories like body wash liquids.
  4. Discussion on Horlicks' performance and its potential as a discretionary category.

Strategic Considerations

  1. Inquiry into the four strategic pillars and their implementation timeline.
  2. Discussion on the trade-off between volume growth and operating margins.
  3. Strategy for modernizing core brands and scaling 'fewer bigger bets' for market development.
  4. Approach to e-commerce and quick commerce channels for market share growth.
Hindustan Unilever Ltd (HINDUNILVR) Concall Report Analysis & Insights | Dhanarthi