ET Intelligence Group: Hindustan Unilever (HUL), Indias largest consumer goods company, delivered a double-digit volume growth for the second consecutive quarter, much ahead of street estimates.Volume growth for March quarter was 11 per cent against expectations of 6-8 per cent.
In the corresponding quarter of the previous year, volume growth was 4 per cent.
The growth was broad-based, across categories similar to the preceding quarter.
Key business segments such as home care, personal care and tea, which together account for over twothirds of the revenue, reported double-digit volume growth.Market experts attribute the growth in the past two quarters to the implementation of the Goods and Services Tax (GST) and low base in the previous year due to demonetisation.
Retailers who had lowered inventories before the GST implementation are now gradually building it back to normal levels.
This implies the company will be able to report similar growth in the June 2018 quarter.Revenue rose by 16 per cent to Rs 9,003 crore in the March 2018 quarter.Net profit after adjusting for exceptional items increased by 14 per cent to Rs 1,351 crore.
The operating margin before depreciation (EBITDA margin) improved by 160 basis points to 22.7 per cent.Segment-wise, home care, personal care, refreshment and food categories delivered 21 per cent, 13 per cent, 14 per cent and 10 per cent sales growth, respectively.The HUL management said that there is gradual improvement in demand, but the competitive intensity is stepping up.
At the same time, the inflation in input costs, crude and currency will be the key things to watch out for in the near term.The HUL stock has gained nearly 11 per cent since April on anticipation of strong results.
At Mondays closing price of Rs 1,505 on the BSE, it traded at 63 times trailing 12-month earnings.
At such a high valuation, the stock appears to be fairly priced factoring in the medium-term growth.