HINDUNILVR - Hindustan Unilever Ltd. Share Price

Hindustan Unilever Limited (HUL) provided a cautiously optimistic outlook during its earnings call for the financial year ended March 31, 2025. Management highlighted expectations for gradual improvement in growth trends, supported by accelerating portfolio transformation actions and enhancing macroeconomic conditions. Key drivers include anticipated monetary stimulus, tax relief, declining inflation, and higher agricultural output, with expectations that the first half of the financial year 2026 will perform better than the second half of financial year 2025.

Key forward-looking points shared by management include:

1. Growth and Pricing: Management anticipates low single-digit price growth for the upcoming period, influenced by inflationary trends in certain commodities versus deflation in others. They aim to optimize the price-value equation while maintaining competitiveness.

2. EBITDA Margin Guidance: An EBITDA margin target of 22% to 23% was set for the near term, reflecting a strategic decision to increase investments across various P&L lines to stimulate growth rather than prioritize margin expansion. This is seen as a "lean in" approach for the next few quarters.

3. Investment Focus: Plans to ramp up investments in multi-year market-making platforms and enhance strategic capabilities to successfully execute the portfolio transformation strategy. This convergence of factors is expected to help HUL capture growth opportunities across its segments.

4. Market Maker Performance: The Market Makers portfolio is expected to continue delivering strong double-digit growth, with significant emphasis on transforming the Future Core and new segments, contributing to overall long-term growth strategy.

5. Segment Specifics: Lifebuoy and Glow & Lovely have undergone comprehensive relaunches to meet evolving consumer needs, aimed at improving their market positions. Nutrition Drinks are being focused on revitalization to combat previous category headwinds.

The management's remarks reflect a commitment to maintaining competitive strength while addressing operational efficiencies and market dynamics in a growth-oriented strategy to navigate the evolving landscape of the FMCG sector.

Q1: Can you explain the EBITDA margin guidance change? What segments are affected?
A: Our EBITDA margin guidance is now set at 22% to 23%, down from 23.1%-24%. This adjustment isn't driven by price versus cost changes but reflects our decision to increase investments across all areas. We believe improving macro conditions and our portfolio transformation efforts allow us to invest more now. The focus on Beauty & Wellbeing will see increased investments, but this adjustment isn't a reflection of pricing pressures in Home Care.

Q2: Is there a risk of increased price-based competition in laundry?
A: The EBITDA margin change isn't specifically tied to Home Care pricing. While inflation leads to some price versus cost impacts due to gradual pricing increases, we've consistently followed inflation trends. Our pricing strategy is crafted to avoid significant compression, ensuring competitive price value equations.

Q3: What is your outlook on the Horlicks portfolio? Will it impact margins?
A: We are committed to revitalizing Horlicks without compromising margins. The focus is on making it contemporary and relevant. Investments will be made in adult nutrition and Boost, both significantly contributing to growth. Drawing from our strategy, any impact on margins will be addressed through improved consumption strategies.

Q4: What are your growth expectations in the sunscreen category?
A: Sunscreen presents a significant growth opportunity with only 3% urban penetration, projected to grow rapidly. We aim to enhance consumer awareness around SPF and UVA protection, alongside advocating for product credibility. This strategic focus differentiates us in a high-margin category.

Q5: Do you see current macroeconomic conditions improving demand? When will we see this?
A: We anticipate improvement in demand over the next few quarters, benefiting from favorable macro trends, including reduced food inflation and a good monsoon. The June and September quarters could witness stronger market demand thanks to our robust portfolio and investment strategy.

Q6: How long do you expect to maintain the 22%-23% EBITDA margin?
A: This margin guidance reflects near-to-midterm expectations, primarily for the next 2-3 quarters. Our longer-term aspiration for modest margin improvement remains unchanged, and we believe moving forward, as we see growth momentum, the margins will improve too.

Q7: What will be the indicators that your growth strategy is working?
A: Our focus remains on volume-led growth, with success gauged through increased market share driven by growing total units sold. In our last four quarters, we noted an uptick in competitive turnover and market share, confirming the strategic investments are yielding positive results.

Q8: How is your competition in the detergent category evolving?
A: The liquid segment is rapidly expanding and outpacing other segments. We are investing in building liquid detergent market share while also optimizing our powders portfolio. Overall, the competitive landscape has remained stable but we expect ongoing growth within this segment due to increased consumer preference.

Please let me know if you need help with anything else!