HUL's Q1 net profit rose 6% to ₹2,768 crore on strong volume growth
Ebitda margin dipped to 22.8% but is expected to improve ahead
Stock surged 8% as brokerages upgraded outlook and price targets
Shares of consumer goods behemoth Hindustan Unilever rose 8% across two sessions, as investors welcomed its upbeat Q1 earnings, a stark contrast to the lull seen through much of the previous fiscal year.
The company posted a 6% year-on-year rise in consolidated net profit to ₹2,768 crore for the quarter gone by, bolstered by lower tax expenses and volume-led sales growth across key categories. Revenue grew 5% to ₹16,323 crore, with underlying volume growth (UVG) at 4% and underlying sales growth (USG) at 5%. Foods volume expanded at a mid-single-digit rate versus a mid-single-digit dip in Q4FY25, while food revenue rose 5% year-on-year, turning positive after three straight quarters of decline.
Though the Ebitda margin contracted by 130 basis points on-year to 22.8% due to higher advertising and promotion costs, the company expects expansion ahead, aided by product pricing and stable input costs.
HUL reiterated its guidance that H1FY26 would outperform H2FY25, with pricing growth expected in the low-single digits if commodity prices remain steady. Gross margin is expected to improve sequentially, while the Ebitda margin is likely to remain between 22–23%. Both tea and coffee categories are expected to see some correction, primarily due to a healthy crop.
Analysts at Nuvama Institutional Equities expect tea and coffee prices to correct in FY26, driven by a strong crop. This is expected to give HUL additional headroom to reinvest into the business and support sustainable volume growth.
JM Financial also struck an optimistic tone, stating that with an improving macro narrative and clearer portfolio interventions by HUL, the worst appears to be behind. “Going ahead, acceleration in volume growth, premiumisation and new MD & CEO Priya Nair’s strategic directions on the same will be key monitorables,” it said.
Meanwhile, Goldman Sachs upgraded HUL to a ‘buy’ from ‘neutral’ and raised its price target by 21%to ₹2,900. This is the first time Goldman Sachs has rolled out a ‘buy’ call for HUL since initiating coverage in 2022.
Goldman wrote that HUL's earnings growth is witnessing a turnaround, driven by macro factors and internal initiatives. It expects revenue growth to reach high-single-digit levels by H2FY26 and FY27. Once growth picks up, it expects margins to improve, driven by operating leverage on fixed costs and advertising spend.
As a result, Goldman Sachs expects HUL's earnings-per-stock growth to accelerate to double digits over FY26–28, compared to the low-single-digit CAGR seen between FY23–26.
