Buy Hindustan Unilever Ltd for the Target Rs. 2,650 by Motilal Oswal Financial Services Ltd
Improvement in underlying trends; optimistic for FY27
* Hindustan Unilever (HUVR) registered consolidated revenue growth of 8% (adjusted for the ice-cream demerger) at INR162.1b (est. INR159.6b). Underlying volume growth was at 6% YoY (15 quarter high). Growth was aided by GST benefits and the multiple initiatives undertaken by the company in transforming its product portfolio and channels. Management highlighted that there was no meaningful trade channel pre-buying ahead of the recent price hikes (2-5%) undertaken during March-April.
* Gross margin remained under pressure, dipping 110bp YoY to 50.3% (vs est. 51.5%, 51.4% in 3QFY26). Ongoing geopolitical uncertainties led to 10% RM inflation. HUVR is taking calibrated price hikes across categories that cover the 10% inflation level, and the company has indicated that further pricing actions could be implemented if crude inflation remains elevated. EBITDA margin contracted 30bp YoY to 23.5%. (est. 23.6%). Management reiterates its medium-term EBITDA margin guidance range of 22.5-23.5%.
* HUVR continues to remain focused on driving volume-led revenue growth, even if it comes at the expense of near-term margins. Despite concerns around rising crude prices and macro volatility, HUVR believes it is wellpositioned to navigate the environment through commodity hedges, accelerated cost-saving initiatives, portfolio transformation strategies, and strengthening omnichannel capabilities. Further, the company announced INR20b capex toward premium and high-growth categories and remains optimistic about delivering better performance in FY27 vs FY26. We reiterate our BUY rating on the stock with a TP of INR2,650 (50x on Mar’28E EPS).
In-line show with UVG at 6%
* Slightly better UVG at 6%: Net sales grew 8% YoY to INR162b (est. INR159.6b). Adjusted for the ice-cream demerger, our underlying revenue growth expectation was 7% in 4Q. Underlying volume growth stood at 6% YoY (est. 5% and 4% in 3QFY26/+2% in 4QFY25).
* Home Care delivered high single-digit volume growth, with revenue growing 9% YoY to INR63.4b. Fabric Wash delivered double-digit growth, and Household Care delivered high single-digit growth. Liquids portfolio accelerated its robust double-digit growth trajectory, while powders and bars also recorded a step-up in performance. EBIT grew 11%, with margin expanding 30bp YoY to 19.1%.
* Beauty & Wellbeing segment witnessed mid-single digit volume growth, with revenue increasing 13% to INR37b (consol.). Hair Care reported strong double-digit growth. In Skin Care and Colour Cosmetics, strong performance in the premium portfolio was offset by subdued performance in mass skin care. In FY26, Vaseline and Sunsilk both crossed the INR10b annual turnover. EBIT grew by 3% and margin contracted 290bp YoY to 29.1%.
* Personal Care consol. sales grew 5% YoY to INR22.3b. Skin Cleansing delivered high single-digit growth, driven by outperformance in Dove and Lux. HUVR witnessed double-digit competitive growth in Premium Soaps and Bodywash. Oral Care reported low single-digit growth, while Closeup strengthened its market share. Personal Care EBIT grew 5%, and margin remained flat at 18.7%.
* Food & Refreshment (F&R) delivered high single-digit UVG, with consol. sales growing 4% to INR35.7b. Tea reported low single-digit UVG. Coffee continued its strong double-digit growth momentum, supported by volume and price. Lifestyle Nutrition achieved double-digit growth. Expansion into new demand spaces, along with Horlicks relaunch, is delivering early encouraging results. Packaged Foods reported mid-single digit growth. The Food & Refreshment segment EBIT grew 10% YoY, and margin stood at 20%.
* In-line EBITDA growth at 6% YoY: Gross margins for the quarter contracted 100bp YoY to 50.3% (est. 51.5%). Employee expense grew 3% YoY, while other expenses rose 5% YoY, and Ad-spends rose 6% YoY. EBITDA margin contracted 30bp YoY to 22.8%. (est. 22.9%). EBITDA grew 6% YoY at INR38b (est. INR38b – adjusted with ice-cream demerger). PBT grew 4% YoY at INR36.8b (est. INR35.6b), PAT (bei) grew 4% YoY to INR27.1b (est. INR26.9b).
* FY26 revenue/EBITDA grew 5%/3% while PAT remained flat YoY.
Management conference call highlights
* Management highlighted three key positives that could protect rural demand despite El Nino concerns: 1) water reservoir levels are ~10% higher than normal, 2) MSPs have increased by 5-6%, supporting farmer incomes, and 3) government food grain stocks remain high due to strong crop production over the last two years.
* Raw material costs increased by 8-10%. The company took 2-5% of price hike across the portfolio to mitigate the inflationary pressure. It will continue to take calibrated price hikes if crude-led inflation sustains.
* The company maintains consolidated EBITDA margin guidance in the range of 22.5-23.5%, adjusted for the Ice-cream business demerger.
* In e-commerce, the company delivered over 25% turnover growth; in Quick Commerce, the company doubled turnover in FY26.
Valuation and view
* We largely maintain our EPS estimates for FY27 and FY28.
* HUVR remains focused on topline growth, backed by volume acceleration alongside new launches across categories and channels. The company has unveiled its ‘Unified India’ strategy to lean the organization structure to accelerate decision making and execution.
* HUVR continues to remain focused on driving volume-led revenue growth, even if it comes at the expense of near-term margins. Despite concerns around rising crude prices and macro volatility, the company believes it is well positioned to navigate the environment through commodity hedges, accelerated cost-saving initiatives, portfolio transformation strategies, and strengthening omnichannel capabilities. Further, the company announced INR20b capex toward premium and high-growth categories, and remains optimistic about delivering better performance in FY27 vs FY26. We reiterate our BUY rating on the stock with a TP of INR2,650 (50x on Mar’28E EPS).
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