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Hindustan Unilever (LON:) Limited (HUL) saw its shares drop by 2% on Friday, following a Q2 earnings report that fell short of investor expectations. The disappointing results were attributed to subdued volume growth stemming from poor rural performance and increased competition from smaller players.
Shares in the company opened at ₹2,520 and fell to ₹2,490.65, marking a 1.1% and subsequently a further 2.2% decrease. Despite the downturn, HUL reported a Q2FY24 profit of ₹2,717 crore, an increase of 3.86% from last year, and sales rose by 3.53% to ₹15,027 crore. An interim dividend of ₹18 per share was declared for the year ending March 31, 2024.
However, investors have not seen positive returns from HUL shares over the past year, with a negative return of -3.4%. The operating profit for Q2 FY24 was ₹3,425 crore, up from ₹3,129 crore in the previous year. EBITDA rose by 9% to ₹3,694 crore and the margin increased by 130 basis points to 24.6%.
Volume growths in the company’s divisions showed some variation; with 3% in the home care business and 4% in beauty & personal care and foods & refreshment divisions respectively.
Analysts from ICICI Securities, JM Financial, and Prabhudas Lilladher have expressed mixed sentiments post-results, setting price targets of ₹2,800, ₹2,880, and ₹2,786 respectively. All firms noted HUL’s below-expectation volume growth due to subdued rural performance and increased competition.
The gross margin expanded by 690 bps YoY to 52.7%. However, Prabhudas Lilladher cut EPS by -0.9% and -2.1% for FY24 and FY25 respectively due to sustained pressure on volumes.
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