GST rate cut benefits begin reflecting in HUL Q3 numbers: Kaustubh Pawaskar

Synopsis

Hindustan Unilever Ltd (HUL) reported quarterly revenues largely in line with expectations, while its margins surprised investors by exceeding forecasts. This upside in profitability was attributed to improving trends in key segments and the gradual impact of GST rate cuts, offering some comfort amid a challenging consumption environment.

Hindustan Unilever Ltd (HUL) reported quarterly numbers that were largely in line on revenues, while margins surprised on the upside, offering some comfort to investors amid a challenging consumption environment.

Market participants noted that while top-line performance met expectations, operating profitability came in stronger than anticipated, helped by improving trends across key segments and the gradual impact of GST rate cuts.

Commenting on the results, Kaustubh Pawaskar, Lead Analyst, ICICI Direct said revenue performance was broadly as expected, while margins exceeded forecasts.

“On the revenue front, numbers are broadly in line with what we were anticipating for the quarter. Margins came in a little better than expectations. We were anticipating around 22.5% EBITDA margin, while margins came in at around 23%. So, at the margin level, the numbers are better than what we had anticipated. Also, we are seeing that there is a bit of recovery in growth sequentially in most of the segments like home care and beauty. So, I think the benefit of the GST rate cut is also coming in. It came with a lag, but now it has started coming in for most of the companies, and we are seeing that impact.”

ET Now also sought clarity on profitability after adjusting for one-time costs related to labour code implementation.

Pawaskar noted that excluding exceptional employee-related expenses, margins remained comfortably ahead of expectations.

“Yes, so profitability, if you exclude the ₹113 crore of one-time expenses, which is part of the employee cost regarding the labour code, if you exclude that, the EBITDA margins came in at around 23%, which is better than what we were anticipating at around 22.5%.”

The sequential improvement across categories such as home care and beauty, along with easing cost pressures and the delayed benefits of GST rate reductions, suggest that operating conditions may be gradually stabilising for FMCG players.

Analysts will continue to track volume recovery trends and margin sustainability in the coming quarters as consumption demand and input costs remain key variables for the sector.

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